Equity release lending dipped by 1% in the third quarter to £591m, while overall customer numbers increased by 1% to 13,611, according to the Equity Release Council.

The number of new customers rose by 1% over the quarter to 5,357, while returning drawdown customers increased by 3% to 7,169.

However, further advance customer numbers fell by 10% to 1,085.

Compared with the third quarter of last year, total lending was down by 7% and overall customer numbers were 6% lower, the ERC found.

New customer numbers fell by 3% year on year, while returning drawdown customers were down by 7%.

Average new lump sum borrowing decreased by 1% over the quarter to £112,822, while average initial drawdown borrowing fell by 8% to £58,473.

By contrast, average drawdown reserve facilities increased by 3% to £58,497, suggesting customers were continuing to retain access to future borrowing rather than taking the full amount immediately.

Average borrowing by returning drawdown customers was broadly unchanged at £13,213.

The council’s latest adviser survey also pointed to continued caution among customers.

Some 42.5% of firms reported an increase in enquiries compared with the previous quarter, while a third saw applications rise and a third reported a fall.

However, 40% of firms said case completions had declined.

Loan-to-value availability also remained a concern, with 66.7% of advisers reporting that available LTVs had fallen during the quarter.

Among firms whose customers decided not to proceed with equity release, 80.6% said rates were too high, while 61.1% cited customers being unable to secure the LTV they needed.

A further 36.1% said they had advised customers to wait.

Equity Release Council chair John Godfrey says: “The latest figures show a market that is demonstrating resilience, with some areas of activity moving in the right direction despite the wider pressures on household finances.

“It is encouraging to see new customer numbers and returning drawdown activity increase over the quarter, although overall lending remains below the levels recorded a year ago.”

Equity Release Council chief executive Jim Boyd says: “The adviser survey reinforces the picture of a market where demand remains, but in an economically challenging environment converting interest into completed business is proving more difficult.

“Borrowing costs and loan-to-value constraints continue to affect customers’ decisions, while some are choosing to wait rather than proceed immediately.”

Royal London equity release head of proposition Brendan Gilligan says: “While the latest figures reflect a challenging quarter for the market, the underlying need for later-life lending has not gone away.

“Many people approaching and in retirement have significant wealth tied up in their homes, and for some it can play an important role alongside pensions, savings and other assets when funding later life. Higher interest rates are understandably causing some customers to pause before accessing that wealth, which continues to affect market activity.”

Air chief executive Will Hale says: “The 7% year-on-year fall in equity release lending in the third quarter is yet another sign of how far this market is from reaching its potential.

“Even for those customers engaging with a mortgage adviser, most are not made aware of, and therefore do not consider, the full range of later life lending options available.

“The FCA’s later life mortgage market study has put this sector firmly in the spotlight and advisers need to evolve their propositions to ensure they consider all options before arriving at the most suitable recommendation.

“Equity release will not be appropriate in all circumstances but as we always say: write, refer, just don’t ignore.”