Despite record equity release figures at the start of the year, new statistics reveal another hike in the size of the market. This article provides the new figures, along with interpretation of the market’s direction of travel.

Equity release from properties by homeowners has been an ongoing topic for Adviser Points of View. And recent figures show the amount of equity released in the last three months was up 7.2% on the previous three months, while the number of completed plans was up 12.8% over the same period.

For Responsible Equity Release managing director Steve Wilkie, the new stats show a market that is accessing a “matured” product.

“It’s evident in the way people see equity release now, that the sector has grown up” said Wilkie.

“Equity release has matured as a product and the popularity of drawdown is an illustration of just how far the industry has come. Homeowners are seeing equity release as a valuable financial solution, particularly in retirement; an income tap to be turned on when needed, and not funds to spend frivolously.”

But decision-making around equity release requires careful management.

An equity release plan to purchase another property could be risky on two fronts. Firstly, a fall in value could create negative equity in the new purchase, while putting pressure o the value of the existing property from which equity has already been taken out.

Recent figures show that London prices had dipped 0.7% in the year to June – the largest drop since 2009 – effectively wiping more than £2,000 off the average property value. We have also seen interest rates rise.

Following Nationwide’s two latest house price indices, showing a small slump in June and a modest rebound in July, CEO Sam Mitchell said it was “not necessarily a bad thing” that the market appeared subdued and flat.

“For the past decade we have ridden a rollercoaster of rising and falling prices, but right now it seems to tick up a little one month and tick down a little the next,” said Mitchell.

“Buyer and seller activity is likely to pick-up significantly in a month or so. September is generally a very busy period for the housing market, and sets the tone for the rest of the year.

“We should also get a better idea how buyers are sellers are feeling, and whether the likely small rise in interest rates has had any immediate impact.”

Kevin Reed is one of the UK’s most senior accounting and finance journalists. He is a former editor of Accountancy Age and Financial Director, and writes regularly on corporate and professional services governance

Further reading on this topic:

Equity release figures hit unprecedented levels at end of 2017