Homeowners borrowed a record £1.61 billion through equity release schemes in 2015, according to the latest figures from the Equity Release Council.
The trade body found that the lifetime mortgage market has doubled in size since 2011, and is now 33% larger than its pre-recession peak. Overall, lending was 16% higher than 2014.
Drawdown products accounted for two-thirds of equity release plans in 2015. These let people borrow against their property in phases, and are typically cheaper than releasing equity in a single lump sum, which is the second most popular type of lifetime mortgage.
Money borrowed through home reversion schemes, where the borrower sells the property or a stake in it but keeps the right to live there rent-free, rose 82% in 2015 compared to 2014. However, this remains a relatively niche area of the market, accounting for 1% of equity release plans.
Equity release plans can be good for homeowners who need to boost their cash in retirement, but it’s an expensive way to borrow because the interest compounds every month. Find out more on how it works in our equity release guide.
‘Growing reliance on housing wealth’
Nigel Waterson, chairman of the Equity Release Council, says: “These year-end figures are the latest sign of growing reliance on housing wealth as a key pillar of later-life financial planning.
“Housing wealth is often people’s greatest asset and it makes sense for equity release to be on every homeowner’s checklist to consider as part of their retirement and estate planning.”
Alex Edmans, spokesperson for Saga, adds: “These latest figures suggest that people like being able to unlock cash from their home as and when they need it. This can be a smart move financially as people only have to pay interest on the funds they release, but they know that they can unlock more cash at a later date if they need to.”