Homeowners accessing cash from their properties increased 26% over the year with over £3 billion of equity release in the first six months.
The number of new equity release plans increased by 26% year-on-year to 12,485 in the second quarter as homeowner numbers recovered since the pandemic, according to the Equity Release Council.
New plans access an average lump sum cash amount of £135,000 using a lifetime mortgage whereas 11,425 returning customers withdraw amounts of £13,506 from a drawdown reserve.
The value of mortgages in the second quarter was £1.60bn, up from £1.53bn in the first quarter and a record amount of £3.13bn for the first half of the year compared to £3.89bn for the whole of the year in 2020.
Equity release popularity with homeowners increased from £2.15bn in 2016 to £3.09bn in 2017 due to reducing interest rates and rising house prices, further improving in 2018 to £3.94bn.
More people accessing cash
With higher property values homeowners with equity are accessing cash for a specific reason such as to gifting the deposit to children or grandchildren to buy their own home.
A total of 23,910 new and returning customers in the second quarter this year is 17% higher than 20,352 for the second quarter in 2021 and is 2% higher than the first quarter of 2022.
The level of equity release mortgages is growing at a record amount and could be £6.2bn this year, although it is below the projections by Mintel in 2018 expecting it to be £8.96bn in 2022.
Lump sum plans could be used when buying a new house with equity release and the average amount is £132,331 compared to the second quarter 2021 of £129,558.
Customers have types of plan structures to consider as providers apply early repayment charges with either a fixed interest reducing over time or gilt based which could be a large penalty or nil, depending on yields.
You can consider replacing an existing equity release plan especially if the early repayment charges are based on gilts as yields have increased, which means there may be no penalties to move.
See how to how much you can access from your home to repay an existing plan with a drawdown reserve at this link:
Free equity release calculator with instant results to repay an existing plan.
Existing customers with drawdown
Average property values are £283,000 after house prices rise on average by 12.8% or £32,000 allowing new customers to have a drawdown reserve for future cash withdrawals.
New customer preferences have changed in the second quarter with 54% of lifetime mortgages as lump sum products and 46% as drawdown products.
In the second quarter 2022 there were 9,305 customers returning to take more cash compared to 9,450 in the first quarter taking an average of £13,506 which is 33% higher than a year ago.
For drawdown plans the initial average lump sum is £90,646 up from the same quarter a year ago of £86,349 and you can still drawdown cash over time with the reserve amount.
The amount of cash drawdown customers keep in reserve for the future has increased by 37% due to rising house prices from £34,310 last year to £46,833 this year.
There were only 2,120 further advances with lump sum advances averaging £31,367 and for drawdown £29,843 of which £22,754 was up front and £7,089 held in reserve.
What are your next steps?
Talk to our London City Mortgage advisers if you need to access cash due to the cost of living, we can manage the lifetime mortgage plan through the provider valuation and offer.
Find out more about the leading products and interest rates to consider when accessing cash from your home with this link:
Free equity release quote with interest rates to buy a new home.
Our expert advisers can find products to meet your objectives to release tax-free cash. Learn more by using the equity release calculator, property value tracker chart and mortgage costs calculator.
