New and returning equity release customers in Q4 totalled 13,651, down from 17,078 in Q3 2023 and 20,597 in Q4 2022, according to the Equity Release Council’s report.
Throughout 2023, 26,119 customers took out new equity release plans, with drawdown plans restored as the majority preference – attracting 53% of customers last year and 55% in Q4. The average amount borrowed by new customers in Q4 2023 was £79,484, compared to £106,917 a year prior.
With smaller loan sizes and the ability to make voluntary partial repayments on all new plans, customers are better able to manage their exposure to higher interest rates. 2023 saw 64,448 active customers taking out new plans, making use of drawdown reserves or agreeing extensions to existing plans, down 31% year-on-year.
What’s more, the total annual lending of £2.6bn in 2023 followed a record-breaking £6.2bn in 2022, returning the market to the level of activity last seen between 2016 to 2017 (£2.1bn to £3.1bn). Commenting on the report, Mark Gregory, Founder and CEO of Equity Release Group, said:
“Last year presented market conditions resulting in an incredibly difficult year and one of the most challenging we’ve probably experienced within the industry so far, with the market down over 50% in total lending.
Notwithstanding this, there is now vested interest within the market following the rise of a broader set of products and increase in RIO/TIO lending, which brings about higher case values. Plus, with recent innovations in hybrid, diverse and more favourable products, we expect this to also raise the level of overall borrowing across the later life lending industry.
Furthermore, the 15-year gilt index has been slowly coming down from the highs of 2023, which has enabled lenders to reduce their rates. Coupled with the fact that property values have held their own against expectation, we have now seen lenders begin to increase their LTVs. Hence, we are seeing the green shoots of recovery, with Advisers feeling a renewed sense of confidence following consumer’s appetite for greater lifestyle purchases, as opposed to just debt consolidation mortgage repayments.”
Craig Brown, CEO, Legal & General Home Finance, said:
“Last year was challenging for homeowners for many reasons, resulting in a significant downturn in the equity release market, but I’m proud the later-life lending industry has shown resilience and pushed forward with innovation. As we look ahead, we anticipate 2024 will bring a renewed interest in lifetime mortgages and see more customers reconsider using property wealth for their financial needs.
Customers have been cautious, but there are signs that the market is stabilising. House prices are still significantly higher than pre-pandemic figures (18% up from the end of 2019), so property still represents an important asset for homeowners to consider as part of their long term financial planning.
As a lender, we will continue to work with advisers and listen to their feedback to ensure we carry on delivering innovative solutions to give customers as many options as possible when considering their later life lending needs.”
