Three in five new customers (61%) opted for drawdown lifetime mortgages in Q4, the highest percentage of the year and up from 59% in Q4 2020.

Lump sum lifetime mortgages made up 43% of new plans agreed across the whole of 2021, matching the figure recorded in 2020 which was the largest annual share of market activity since 2009 (44%).

New customers taking out drawdown plans in Q4 increased their total borrowing by 18% compared with Q4 2020, with an average of £96,699 taken up front and £35,532 reserved for future use.

New lump sum plan sizes have grown 20% over the same period to £125,911.

The average lump sum plan was £124,990, while the average drawdown plan featured an up-front amount of £89,786 with £34,950 held back for future use, making £124,735 in total.

Q4 2021 saw 7,571 existing customers with drawdown lifetime mortgages make use of their agreed reserves.

This was a slight drop from Q3 (down 5%) from 6,697 in Q3 but represented a bounce-back from a subdued Q4 last year, with activity volumes increasing 11%.

The average instalment taken by returning drawdown customers was £12,501 in Q4, up from £11,476 in Q3.

Across 2021 as a whole, 30,521 returning drawdown customers made use of the ability to draw funds from their agreed reserves, up from 28,902 in 2020 but short of the 36,426 seen in 2019.

Further advance activity also increased in Q4 2021, with 1,391 extensions agreed to existing equity release plans. This compares to 1,275 in Q3 2021 and 975 in Q4 2020.

For the full year, 4,669 customers agreed extensions to their existing plans, which may reflect the fact that rising house prices have given some homeowners more equity to draw on.

David Burrowes, chairman of the ERC, said: “Cost of living pressures are just one of many reasons why homeowners are choosing to cash in on years of wealth accumulated in their homes.

“Increasing loan sizes partly reflect the rise in house prices and a more affluent type of customer using lifetime mortgages to plan their finances or gift a living legacy to family members.

“Having proved itself to have solid foundations through a period of uncertainty, the equity release market’s return to growth has just as much to do with trust and innovation as it does with external factors as households look to manage their finances in later life.

“Equity release products have continued to evolve in recent years with new providers and features adding to their appeal.

“Increasingly flexibility has brought lifetime mortgages closer to their residential equivalents, by offering capital or interest payment options alongside long-term, time-honoured protections against rising interest rates and negative equity.”

Alice Watson, head of marketing at Canada Life, added: “This is really a fantastic result for the industry.

“I’m thrilled to see the market return to growth so quickly after the world was turned upside down during the pandemic.

“Today’s report shows that equity release has not only proven its resilience but also its relevance in modern retirement journeys as people seek to support their lifestyles or help out family members financially.

“As cost of living pressures start to take hold, we may see even more people turning to their property wealth, particularly as house prices continue to grow across all areas of the country.

“As shown throughout the pandemic, the equity release industry will continue to evolve and adjust its product range to best provide for new and existing customers.”

Will Hale, chief executive of Key, said: “Today’s figures highlight the vital role that equity release plays in the finances of many over-55s with almost 80,000 new and returning customers benefitting from accessing £4.8 billion worth of housing equity.

“Key’s market monitor suggests that the increase in the amount released is due the prevalence of gifting, debt management and remortgaging of existing equity release plans.

“Over 5,200 customers chose to move an average of £135,529 worth of existing borrowing from an interest rate of 5.1% to 3.6% in 2021 – saving themselves interest and benefitting from the increased flexibilities of modern equity release products.

“While there is always more to do as an industry to support customers, we are pleased to see that housing equity is being used by increasing numbers of people to support their retirement aspirations.

“Looking ahead, with customers having focusing on meeting pressing needs over the last 24 months, we anticipate that there will be pent up demand for discretionary spending amongst some over-55s who have found that their retirement is currently very different from what they anticipated.

“However, this is likely to be tempered by inflationary pressures and increasing numbers of customers seeking to boost their or their families spending power to meet rising household bills.

“The later life lending market is able to support these wide ranging needs and this will be good for consumers, the market and the wider economy as we move through 2022.

“As an industry, we must rise to the challenge of supporting our clients by continuing the evolution that has seen significant growth in innovative products and options for customers.”

David Forsdyke, equity release expert and head of later life finance at Knight Frank Finance, said: “We are seeing a significant uptick in wealthier customers using equity release and have built a team of experts to service this demand.

“Wealth Managers and Financial Planners are increasingly seeking our advice on the equity release market, especially for larger loans and more complex scenarios.

“Wealthier home owners are accessing the equity tied up in their property for a wide variety of reasons, including; as part of estate planning to reduce clients’ potential inheritance tax liabilities. Another major reason is to top up income during retirement.

“In some scenarios the advantages of using property wealth ahead of other assets is clear.”