Mortgage-customer volume up 22% in UK as interest in equity release rises

A record 22 percent increase in mortgage customers volume was witnessed in the UK housing market in 2016 as more home owners embraced equity release on their homes.  A new data shows it was a record breaking year for equity release in that country as the year saw lifetime mortgages become the fastest growing product in terms of customer numbers.

For Nigerian investors who have bought homes in London, especially, this provides an opportunity to unlock the wealth in their properties, earn the hard currency and use same to take advantage of the lull in the home market where demand for housing has dropped significantly.

2016 also witnessed a total of 27,534 new plans agreed according to the figures from the spring 2017 equity release market report from the Equity Release Council.

Meanwhile buy to let remortgaging, the second fastest growing mortgage segment, saw an increase of 16 percent, having recorded the biggest annual growth rate in the previous three years.

Other segments of the mortgage market had a mixed year in 2016. While remortgaging numbers grew 14 percent and first time buyer numbers by 8 percent, the volume of home mover mortgages fell by 2 percent while buy to let purchase mortgages fell 13 percent from 2015.

Property Wire notes that equity release remains a small segment of the overall market, but the second half of 2016 saw a record £1.24 billion of housing wealth unlocked with total lending for the year reaching an unprecedented £2.15 billion. The growth rate of lending between 2015 and 2016 was 34 percent, more than double the 16 percent seen from 2014 to 2015.

The council explained that recent years have seen the equity release market become increasingly competitive, as new providers enter the market looking to serve increased demand among older homeowners to access their housing wealth.

This has resulted in a significant fall in average equity release rates of 51 basis points (bps) between July 2016 and January 2017 to 5.45 percent, with many providers offering rates below 5 percent.

At the same time, the number of products available to customers has continued to rise along with the flexibilities these offer, including downsizing protection, capped variable interest rates, and options to make monthly interest payments or annual capital repayments without incurring a charge.

Drawdown mortgage products continued to be the most popular type of equity release plan in 2016, with 65 percent of new customers opting for drawdown compared to 35 percent opting for lump sum mortgages. A small number took out home reversion plans. However, over the course of the year, the proportion of lump sum customers increased slightly, from 33 percent in the first half to 37 percent in the second half.

The average age of equity release customers increased slightly in the second half of 2016, rising from 69.9 to 70.1 years old. The most popular age bracket to take out equity release products remains between 65 and 74, accounting for 54.5 percent of all customers in the second half of the year, which is typically the first decade of retirement. However, this is below the 57.9 percent recorded in the first half.

The market report also shows that the proportion of older equity release customers is rising, with those aged 75 to 84 up from 19.4 percent to 20.2percent, while the proportion aged 85 and above increased from 3 percent to 4.1 percent. The proportion of customers aged 55 to 64 remained relatively stable, rising from 21.2 percent to 21.3 percent.

‘2016 was a hugely significant year for the equity release sector. The value of lending has nearly tripled in the five years from 2011 to surpass the £2 billion mark and we also celebrated the 25th anniversary of the industry standards which have been fundamental to establishing a safe and reliable market for consumers,’ said Nigel Waterson, chairman of the Equity Release Council.