Despite the slowdown in growth last year, over the past decade the equity release market has grown almost four-fold from £945.97 million in 2009.

The final quarter of 2019 was the busiest period of the year, with more than £1 billion unlocked in Q4. It was also one of the busiest quarters on record, second only to Q4 2018 when lending volumes were just 0.1% higher.

The total number of customers taking equity release reach a record high of 85,497, of which 44,870 took out new plans compared to 46,297 in 2018.

Increased product features and flexibilities, such as the ability to make voluntary or partial repayments with no early repayment charge, has helped fuel this long-term growth.

The average interest rate fell to a record low of 4.91% in September 2019, partly the result of increased competition across the market.

Drawdown remains most popular product

Returning drawdown customers increased by 3,676 over the course of the year, up by 11%, while the number of further advances/releases increased by 557, a 15% increase.

The most popular product amongst older homeowners continues to be drawdown mortgages, with nearly two in three (64%) new customers opting for drawdown versus a lump sum product.

Average amounts withdrawn by homeowners have remained steady as customers are advised to unlock values appropriate for their foreseeable financial needs.

During 2019, average withdrawals from new drawdown lifetime mortgages was down by 0.5% in 2018, with the average customer unlocking £63,963 – double the annual income of a retired couple. The DWP Pensioner Income Series 2017/18 states that the average income for a retired couple before housing costs is £31,668.

The average new lump sum customer unlocked £97,282, triple (3.1) the annual income of a retired couple, and a modest increase of 2.4% from 2018’s average withdrawal.

Equity Release Council comment

David Burrowes, chairman of the Equity Release Council, commented: “After a period of steady growth, the market has reached a point of consolidation in 2019 with lending volumes in line with 2018.

“The sector enters 2020 in a strong position with updated standards and a greater number of diverse members signed up than ever before. Looking ahead, we’ll continue to work with stakeholders to ensure consumers are able to access the best advice while ensuring joined up financial planning so that equity release remains a key consideration in mainstream retirement planning.

“Previously viewed as a niche product to support people’s retirement plans, the untapped potential of equity release is now being recognised. This comes as a growing number of customers are recognising the important role property wealth can play in meeting their retirement needs.

“This has been driven by competition, falling interest rates, increasing numbers of flexible and innovative product options and supported by rigorous standards in the market.”

Industry comment

Claire Singleton, chief executive of Legal & General Home Finance, said: “Whilst 2019 was not witness to some of the growth trends we’ve seen in previous years, lifetime mortgages still remain one of the fastest growing parts of the mortgage market.

“A four-fold increase in growth over the past decade is transformational, and the 85,000 plus homeowners who chose to utilise their property wealth in 2019 would no doubt attest to the product’s ability to change lives.

“With Q4 2019 welcoming more new customers than any other period in the year, there’s also reason to be positive about how people are responding to easing political uncertainty. With Brexit now underway, and no more elections on the horizon, customers can now get back to planning their financial lives with more certainty.

Alice Watson, head of marketing, insurance at Canada Life, commented: “2019 was a difficult year for most parts of the UK economy and that’s reflected in today’s ERC stats. But the start of a new decade could herald further expansion for the equity release market, if it builds on the successful foundations of the previous decade: strong customer safeguards, adviser support and a relentless focus on giving customers the flexibility and certainty they want.

“It’s easy to forget how far the industry has come in such a short space of time. Yet an almost record number of new customers in Q4 2019 shows that more and more people are recognising the role that their property wealth can play in financial planning.

“That said, there is still much work to be done – customer misconceptions and negative perceptions of equity release continue to hold back the industry. The industry must work together to overcome these obstacles to growth.

“The strong finish to 2019 is a positive sign for the industry and coincided with a time when wider economic trends indicated a more positive picture for the UK economy. Should these trends persist, and the industry continue to offer innovative products, the market is all but certain to return to expansion in 2020 and beyond.”