The equity release market is nearing £6bn of new lending this year after a record first half which saw the average customer release just over £100,000 in property wealth, new data from Key Later Life Finance shows.

The data found that plan sales grew by 24.5% in the first six months of the year to 25,448 compared with last year.

It also shows that the value of new equity released rose by 31.7% to £2.556bn, a record high for new lending and plan sales in a half year.

The average amount released in the first six months hit £100,468 which is more than £5,000 higher than in 2021 as increased flexibility and house price increases attracted new customers with average interest rates of 3.65%.   

These are lower than those recorded three years ago when they stood at 3.92%. The previous two years saw average interest rates at 3.19% in H1 2020 and 3.02% in H1 2021 respectively.

Key explains this helped existing customers to manage their finances in the face of the cost-of-living squeeze with an additional £876m taken out in further advances and £200m taken out in drawdown which was 32% higher than in the same period last year. 

Customers used drawdown products during the six months to reserve £876m worth of housing equity for use, a 32% increase from £666m in H1 2021. 

The average drawdown customer reserved £52,363 compared with £45,746 last year and took an initial advance of £58,115.   

However, customers who took advantage of their drawdown facilities during the last six months took out on average £11,406, which is lower than the £13,765 last year.

Elsewhere, historically low rates and increased product flexibility are encouraging more customers to remortgage, the data found. 

The Key Market Monitor has tracked these figures for the first time and has revealed a 79% year-on-year increase in the number of people remortgaging from 2,130 in the first half last year to 3,817 this year.

Accounting for nearly a fifth (19%) of all equity released in H1 2021, customers chose to remortgage from 5% to 4.2%.

Key’s data shows an increase in the number of customers using property wealth for discretionary spending, but debt repayment is the major use of the money released.

It found that 57% of customers used some or all of the property wealth to repay debt compared with 53% last year.

While the management of both secure (40%), unsecure debt (9%) as well as equity release borrowing (15%) continued to drive customer decisions, based on their needs rather than desire, Key says it has seen a slight uplift in more discretionary spending as people look to take advantage of the post-pandemic restrictions.

Data showed that the proportion of people spending on holidays increased from 6% in the first half of last year to 12% in H2 this year, although it still only accounted for 1% of the amount released.  

Home and garden improvements which can be both discretionary as well as necessary also saw an increase of 4% in customers using equity for this reason from 33% in the first half of last year to 37% in the first half of this year.

However, with the cost of living crisis forefront of people’s minds, the amount spend also remained flat at 7% of the amount released.

Key chief executive Will Hale says: “As an industry, the first half of the year has seen the market return to growth as we work to develop and grow to better serve over-55s homeowners. With the cost-of-living crisis very much at the forefront of people’s minds, we’ve seen a continue focus on the management of both secured and unsecured debt – although the proportion of people who include some discretionary spending has increased.”