More than £3bn in property wealth was unlocked by retired homeowners last year, according to new figures from the Equity Release Council, the trade body for the equity release sector.
Annual growth is at a 15-year high, the Council said, with increasing numbers viewing equity release as a reliable source of income in later life.
Separate figures from equity release provider Key Equity Release show that the total value of property wealth released last year was up 40% compared to 2016, with just under 39,000 people taking out plans. There were 27,666 plans taken out in 2016.
Dean Mirfin, chief product officer at Key, said: “Expansion in the market is being driven by customer demand as retired homeowners’ confidence in making full use of their property wealth continues to grow.
“2017 saw a series of records broken but perhaps most significant is the pace of expansion last year with around 40% growth in plan sales and the total value released at an all-time high.
“More lenders are launching in the market in response to demand and that in turn is increasing competition, driving down rates and bringing new innovative features to the market as expert advisers increasingly recognise how property wealth makes a major difference for retirement income.”
Retired homeowners unlocked an average of £77,380 each in 2017, according to Key, with a total of £8.2m released every day of the year.
Around 67% of homeowners used the funds released to make home improvements, whilst 24% chose to provide financial help to family and friends. Other popular reasons for unlocking property wealth include paying off debts, and taking more holidays. A fifth (22%) of those who released equity from their homes used the month to pay off existing mortgages including interest-only capital repayments, whilst 31% cleared credit cards and loans.
Londoners released the highest proportion of property wealth, taking an average of around £133,700, compared to nearly £49,000 in Scotland. Nearly a third of all property wealth released during the year was in the South East of England.
The majority of equity release plans (62%) taken out were drawdown plans, which as the name suggests, allow homeowners to draw funds from their property as and when they need them, helping to keep interest charges to a minimum. Of these, 17% were enhanced drawdown equity release plans, which offer enhanced terms to people with health or lifestyle conditions.
If you’re considering equity release, always seek professional financial advice first, as using this type of scheme can affect your entitlement to state benefits and will reduce the value of any inheritance that you may want to leave.