Equity release lending applications are rising as older homeowners consider their options in the face of rising costs and worries over the Budget, one leading specialist financial adviser has said.
The Equity Release Group (ERG) said it has seen a “significant uplift” in enquiries this year, with lead volume up 102% on last year and applications up 52%, thanks to recovering house prices, impending tax changes and retirees needing to release capital to cover rising costs.
Equity release applications were the highest within the South East, South West and North West of England, with interest being stoked by the upcoming Budget, the ERG said.
“The 2024 Autumn Budget, set for tomorrow, will be one of the most closely watched in recent years,” said Mark Gregory, the ERG’s founder.
“The statement is likely to bring financial planning and life goals sharply into focus with potential tax reforms on the horizon, particularly around capital gains, inheritance tax, and pensions.
“However, releasing property wealth is a tax-free source of capital for many in need of options outside of a traditional pension or other savings,” he added.
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Gregory said that more people had released capital in the third quarter for additional borrowing or emergency funds, but less had been given to families as gifts, suggesting that people need readily available cash for existing financial needs as opposed to longer-term goals.
However, he said the market would take “years” to recover from the recent slump.
“Whilst we’re seeing a marked improvement within the industry, alongside our current data, which reflects optimism and demand, there is still some way to go before the market fully recovers and will likely take a few years,” he said.
The ERG report follows similar figures from the Equity Release Council (ERC) last week, which showed that new plans and lending rose for the second successive quarter, which the ERC termed a “gradual recovery”.
According to the ERC, average loan sizes increased modestly, with new lump sum lifetime mortgage customers taking £111,618, while those taking drawdown lifetime mortgages took £69,952 upfront and reserved another £49,747 for future use.
“Housing wealth continues to play a multi-purpose role in people’s financial plans, with mortgage refinancing, gifting and home improvements all common motivations for customers at the moment, alongside topping up retirement income,” said David Burrowes, chair of the ERC.
“As we head towards the end of the year, we anticipate that we will continue to see steady growth if interest rates remain stable and consumer confidence responds positively to the forthcoming Budget,” he added.
