Equity Release Hub

2023 Equity Release Review

With the release of the Equity Release Council’s latest report reviewing performance throughout 2023, its clear to see that like all mortgage activity, last year was challenging for the equity release market.

After a record breaking year in 2022 seeing total annual lending hit an all-time high of £6.2bn, the rise in interest rates took its toll, with 2023’s results dropping to £2.6bn. More aligned with the performance of 2016 and 2017.

What happened to equity release in 2023?

There were 64,448 active customers in 2023 taking new plans out, drawing down on reserves already in place or agreeing extensions to existing plans, a drop of 31% on the previous year. As the UK adjusted to the higher rates of interest, equity release customers became cautious, borrowing lower amounts or delaying their decision to release equity altogether.

However although new customer activity was dramatically affected, the difficult climate didn’t appear to have the same effect on existing customers.

New equity release customers

26,119 new plans were agreed in 2023, a whopping 47% drop on the 49,285 plans arranged in 2022. Of these new customers, 53% secured drawdown lifetime mortgages, giving them the option to hold funds in reserve for future lending. A sign of cautious customers wanting to limit the expense, hoping interest rates will drop by the time they are ready to access funds held in reserve.

As far as average loan size was concerned, again there was a downward trend with lump sum mortgages dropping 26% to £97,878. However, new drawdown customers bucked the trend a little. Although the initial borrowing was down 31% to £61,652, the amount held in reserve remained similar to last year at £43,687, again suggesting customers are waiting for lower interest rates before borrowing further.

Returning equity release customers

In what was undeniably a pretty bleak year for borrowers, the trend for returning customers was a more positive one. Although results across the board were down compared to the record performance of 2022, they were better than 2021.

With 31,329 returning drawdown customers and 7,000 customers agreeing further extensions on existing plans, it would appear that this area of the market is more resilient to the higher interest rates.

Will 2024 be a better year for equity release?

After years of low interest rates, the increases of 2023 were a shock to borrowers throughout the UK. And whilst I don’t believe rates will remain as high as they have been, I think we all need to face facts that there will be no getting back to the halcyon days of 3%.

As we all adjust to what will eventually become the new norm, I believe it is inevitable that the demand for equity release will increase as we ‘later life boomers’ look for new ways to improve our finances and standard of living.

So I think the outlook for the equity release market in 2024 is a positive one but would always recommend homeowners to do their homework, look at alternatives and seek professional advice, because it may not be the right option for you.


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