The equity release market suffered a “turbulent” 12 months with plan sales and drawdowns falling while new lending tumbled 62% to £2.1bn, data from Key shows.  

Later life lending was hit by “base rate rises and the aftershocks of the September 2022 mini-Budget”, according to the lender’s Equity Release Market Monitor 2023.  

Although the prospect of Bank of England base rate cuts later this year and new products may see lending pick up in 2024, the study says.  

However, in 2023 the survey found that plan sales fell 45% to 28,752 with 51% of sales accounted for by drawdown and 48% by lump sum mortgages.   

The total value of lending was £2.7bn, with new lending coming in at £2.1bn (62% down on a year ago), as well as £411m of drawdown and £162m of further advances from existing plans.  

The average amount released by customers last year was £74,148 compared with £106,806 in 2022, while the average age of customers edged one year higher to 72.   

The average interest paid was 6.63% last year compared with 5.7% in 2022.  

Almost three-quarters, or 72%, of cash released went on mortgage and debt repayments compared with 67%, previously. A further 12% of the money released was used to remortgage existing equity release plans.  

However, the report says that innovations such as the launch of payment-term lifetime mortgages allowing customers to access higher LTVs and often at lower rates, and greater flexibility offered by lifetime mortgages are “encouraging” signs for the industry.  

Key chief executive Will Hale says: “We have seen the first shoots of some interesting product innovations that can provide a real boost for market growth, while addressing unmet customer needs.   

“The variety of products that offer repayment options has increased and these provide the potential for customers to both release more cash in order to meet all their needs and to reduce their cost of borrowing – two things that have been barriers to volumes post 2022.    

Hale points out: “In addition, towards the end of 2023 we saw gilt rates drop to below 4%, and as base rates drop in 2024, I am confident this will breathe new life into the core equity release market.   

“We should feel confident the later life lending market is set for a return to growth in 2024.”