Equity release lending increased by 14 per cent to £1.06bn in the first quarter of the year compared to the same period in 2019, new figures reveal.

However, the Equity Release Council’s data largely pre-dates the impact of coronavirus on property transactions, as the lockdown only came into force towards the end of March.

The number of new plans agreed in Q1 increased by 2 per cent to 11,079 compared to a year earlier, marking the largest total for any Q1 period since records began in 1991. 

However, the figure was down by 7 per cent compared to the final quarter of 2019 when there were 11,866 plans taken out.

The total number of new and returning customers served in Q1 reached 21,884, up 7 per cent from 20,397 a year earlier.

Borrowers cited a range of different reasons for choosing to release equity, including to boost their retirement income, fund one-off purchases, pay for homecare or give money to friends and relatives while still alive rather than leaving all their wealth as an inheritance upon death.

Appetite for equity release was bolstered by historically low costs with the average rate falling to 4.48 per cent in January and many best buy deals available at less than 3 per cent.

Drawdown lifetime mortgages remained the most popular type of new plan agreed, but with a slightly lower share of 57 per cent compared to 64 per cent a year earlier. 

Lump sum lifetime mortgages made up the remaining 43 per cent of new plans.

The average size of a new lump sum plan was £102,443 in Q1 2020, broadly stable from £101,058 in Q4 2019. 

Appetite for home reversion plans remained low as they continue to make up less than 1 per cent of new plans agreed. 

ERC chairman David Burrowes says: “These figures reflect the return of consumer confidence to the broader UK economy at the start of the year, after December’s election promised to restore certainty before coronavirus took hold. 

“Pent-up demand from 2019 meant homeowners continued to look to property wealth in growing numbers for later life finance in January and February, backed by strong consumer protections and increasing product flexibility. 

“As the nation has since adjusted to life under lockdown, the market has adapted to find solutions for the safe provision of advice and valuations, enabling customers to choose the option of equity release while respecting social distancing guidelines.” 

More2life chief executive Dave Harris says: “Today’s figures reveal the equity release market started 2020 with signs of strong growth.

“However, as we start to move through Q2, the landscape has become drastically different.  

“The coronavirus pandemic has seen the average equity release customer self-isolating and the industry considering how it can maintain safeguards while still supporting those who need equity release. 

“Continued collaboration amongst funders, lenders and trade bodies to ensure that the solutions customers need during these uncertain and challenging times are available is needed.”

Key chief executive Will Hale says: “While the new normal will undoubtedly have an impact on the market, we have seen the entire industry step up to help customers with developments such as semi-automated valuations, telephone-based advice and a more flexible approach to providing independent legal advice.”

Canada Life head of marketing for insurance Alice Watson adds: “The majority of valuation partners withdrew onsite valuation services towards the end of March, so while Q1 was largely unaffected by the coronavirus pandemic, we will start to see the impact throughout Q2 and Q3.

“While the current situation may delay some cases, we are still processing new applications every day. 

“It is great to see that the equity release industry has pulled together to deliver solutions for advisers and their clients during this period, and I’m confident that as we are eased out of lockdown and valuers get back on the road, the industry will revert to growth.”