Business is booming.

New equity release loans up by a quarter in Q2 as older homeowners seek 'security'

The number of new mortgages taken out in the second quarter of this year increased by 26 percent compared to the same period in 2021.

Homeowners over the age of 55 closed with 12,485 new plans to release shares in the three months to the end of June, equivalent to 205 new plans approved each business day, according to data from the Equity Release Council.

Customers took equity worth £135,000 for new plans, while existing customers taking draws received an average of £13,506.

Increase: According to the Equity Release Council, the equivalent of 205 new share release plans were agreed every business day between April and June 2022

Increase: According to the Equity Release Council, the equivalent of 205 new share release plans were agreed every business day between April and June 2022

Equity release mortgages allow older homeowners to access some of the value tied up in their home tax-free. The loans are then repaid with interest if they die or go into long-term care.

Total property taken up by clients reached £1.6 billion in the second quarter of this year, surpassing the previous quarter’s high of £1.53 billion in the first three months of the year, and resulting in a total of £3.13 billion for the first half of the year.

More new customers (54 percent) opted for lump-sum mortgage products, drawing all of the freed-up equity at once, rather than drawing for the first time in 13 years.

The year-over-year increase in withdrawals is partly attributable to last year’s ‘muted’ market amid UK lockdowns, but it is still below the peak of 12,891 in the last quarter of 2018.

High: The number of new products taken out reached a peak not seen since the last quarter of 2018

High: The number of new products taken out reached a peak not seen since the last quarter of 2018

High: The number of new products taken out reached a peak not seen since the last quarter of 2018

The number of new share release plans increased by 26% in the second quarter, compared to 21% in the previous quarter

The number of new share release plans increased by 26% in the second quarter, compared to 21% in the previous quarter

The number of new share release plans increased by 26% in the second quarter, compared to 21% in the previous quarter

David Burrowes, Chairman of the Equity Release Council, said: “The fact that hundreds of homeowners are now choosing to release equity every day, based on detailed financial and legal advice, is a significant step forward since the market was considered an underdeveloped niche rather than the mainstream option it has become.

“The recent trend towards lump sums is likely to be influenced by customers’ continued desire to donate money to younger relatives and share their wealth across generations, especially as pressures on the cost of living begin to bite.”

Stock release loans, also known as old age mortgages, unlock the value built up in a home, allowing them to access it tax-free.

They allow homeowners 55 and older to get a loan on their home, worth up to 60 percent of its value, while still remaining the sole owner. They can use the money for anything they want.

Rich in assets: Older homeowners can access the money tied up in their homes as inflation rises

Rich in assets: Older homeowners can access the money tied up in their homes as inflation rises

Rich in assets: Older homeowners can access the money tied up in their homes as inflation rises

The loan and accrued interest are then repaid through the sale of the property when the last remaining borrower dies or goes into long-term care.

However, as interest piles up, it can become a significant portion of a home’s value. Some deals offer the option to pay off interest to protect legacies.

One in four grandparents give monetary aid to first-time buyers, with the average now being given £31,000, a recent study by Aviva found.

With the changes introduced in March, all new share release products now offer the option for customers to make penalty-free partial refunds whenever they can afford to. This allows them to reduce their future interest charges without having to make recurring repayments.

This is Money and Age Partnership+’s new stock release comparison tool that allows you to browse the latest share release mortgages and their respective rates.

Lump sums provide ‘security’ amid rising inflation

Steve Wilkie, executive chairman of Lifetime mortgage broker Responsible Life, attributed the increase in the use of stock release products to the ongoing cost of living crisis and suggests that the lump-sum preference stems from fears of rising interest rates.

Stock release: how it works and advice

To help readers considering stock release, This is Money has partnered with Age Partnership+, independent advisors specializing in retirement mortgages and stock release.

Age Partnership+ compares deals across the market and their advisors can help you determine if share release is right for you – or if there are better options, such as downsizing.

Age Partnership+ advisors can also see if those with existing equity release deals can save money by switching.

You can compare share release rates and calculate how much you could potentially borrow with the new share release comparison tool from This is Money’s and Age Partnership+.

Rising interest rates have led to an increase in the number of borrowers opting for a flat-rate mortgage over those with borrowing facilities.

This is the first time a majority has voted for this type of loan since Gordon Brown was prime minister, and it also happens to be the last time interest rates have been this high. That can not be a coincidence.

This has not been the case in the last 13 years when the majority felt they could defer some of their loans to lower their overall interest payments.

“Drawdown allows homeowners to access money when they need it, and not pay interest on that loan until they do.”

“Basically, in an inflationary environment, most retirees feel like they need all their money on the first day again.”

From April to June, 2,120 customers agreed to further advances on existing plans, with 1,019 extending their borrowing plan loans and adding 1,099 additional loans to flat-rate plans.

The typical lump sum advance was £31,367 – roughly equivalent to the appreciation of the average British home over the past year.

The typical further advance draw weighed £29,843, with £22,754 pre-recorded and £7,089 in reserve for future use.

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