There was a 9 per cent drop in new equity release plans taken out on a yearly basis in the third quarter of this year, shows research from Key.

In Q3 2019, 11,772 plans were taken out and, this time around, 10,671,

The value of these new plans barely changed annually, however, with £887m released in Q3 2019 and £884m taken out in Q3 2020.

The average amount released with each plan rose, Key adds. In the third quarter of 2019, this figure stood at £75,300 while this year, it increased to £82,827.

The research looks at what equity release customers are spending their money on. Since the start of the year, an increasing amount has gone towards debt – in the first quarter, 37 per cent, in Q2, 44 per cent and most lately, 47 per cent.

And gifting has risen too – from 21 per cent in Q1 and Q2 to 25 per cent in Q3.

Key chief executive Will Hale comments: “In Q3, we saw a return to more normal market conditions driven by many customers looking to make their finances more robust by reducing their outgoings and/or supplementing their income.

“While the payment holidays offered by big residential lenders have certainly benefitted many, older borrowers who either fear redundancy and a tough climb back into work or early retirement have looked to use equity release to reduce the financial pressure they are feeling.

“Safe in the knowledge that not only are rates at historic lows but through modern flexible equity release plans they can service interest or make ad hoc capital repayments if they so wish to mitigate the impact of roll-up interest.

“Others have seen the stamp duty holiday as the ideal time to help younger relatives onto the property ladder and we’ve seen £221m being gifted with much being pumped into the housing market with recipient’s receiving an average of £57,549 to support their dream of owning a home.

“The market is maturing and is now very much focused on essential rather than discretionary spending.”

Legal & General Home Finance chief executive Claire Singleton says: “Today’s figures show that the dip we saw earlier in the year was largely down to uncertainty caused by the pandemic. As providers adapted their services, and the economic picture became a little clearer, activity picked up.

“It is too early to predict the longer-term impact the pandemic will have on the market and, with further restrictions now in place, it’s clear that the recovery won’t be a straightforward journey.

“Our research has found that the pandemic has forced many to reassess their retirement plans. With the reputation of equity release continuing to grow, we could see a steady, sustained uptick in activity as people consider using their homes to supplement incomes.”