Annual lending to new and existing customers reached £3.89bn in the equity release market in 2020, according to the Equity Release Council’s Q4 and full year statistics.

On quarterly basis, new and returning customers unlocked £1.16bn of property wealth in Q4.

The data shows that this was influenced by an increase in average loan sizes and customers accessing funds held back during lockdown.

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The disruption of the COVID-19 pandemic saw 57% of lending activity occur in Q1 and Q4 of 2020.

Meanwhile, there was a backlog of cases in 2020 which contributed to the 11,566 new equity release plans agreed by over-55 homeowners in Q4.

Overall in 2020 there were 40,337 new plans agreed in total, compared with 44,870 in 2019.

Furthermore, the number of new and returning customers served in Q4 reached 19,333 to leave the annual total at 72,988 for 2020.

With new customer activity for 2020 down 10%, returning drawdown and further advance activity was the most subdued year-on-year, down 21% and 11% respectively.

Additionally, favourable pricing saw the average equity release interest rate fall to 4.01% in Q4 2020, with the lowest rates at 2.30%.

Looking to trends among new customers, 59% opted for drawdown lifetime mortgages in Q4, down slightly from 61% in 2019.

Lump sum lifetime mortgages made up 43% of new plans agreed across the whole of 2020.

This is the largest annual share of activity since 2009, when the figure stood at 44%.

The average new lump sum lifetime mortgage agreed in Q4 was £104,501, an increase of 3% from Q4 2019.

The data also revealed that over 2020, new customers taking out drawdown lifetime mortgages increased their total plan size by 7% with an average of £81,724 taken up front in Q4.

Trends among returning customers showed that in Q4 2020, a total of 6,792 existing customers with drawdown lifetime mortgages made use of their agreed reserves.

This was up 1% from 6,697 in Q3, however, remained 25% down from 9,096 in Q4 2019.

The average instalment taken by returning drawdown customers was £11,520 in Q4, 11% lower than in Q2.

Further advance activity also remained subdued in Q4, with 975 extensions agreed to existing equity release plans.

This compares to 1,106 in Q3 2020 and 1,141 in Q4 2019.

David Burrowes, chairman of the Equity Release Council, said: “These figures offer encouraging signs of market resilience after a year that presented huge challenges to household finances and business operations.

“Over the last decade, releasing equity to boost your finances in later life has grown from a niche pursuit to a competitive market that has stabilised at £3.9bn of lending activity for the last three years, despite significant headwinds driven by Brexit uncertainty and the COVID-19 pandemic.

“The unusual patterns of activity in 2020 show some customers biding their time before accessing property wealth.

“New plans were delayed from earlier in the year and fewer customers have made use of drawdown reserves or sought extensions of existing loans.

“Releasing equity is not an overnight decision and should only be entered into after considering all alternatives.

“In the right circumstances, access to fixed lifetime products at lower rates than the average 10-year mortgage is a big factor in the appeal of modern-day equity release, as is the flexibility to pay interest or repay capital for many products to keep total costs in check.

“Ten years of transformation have made equity release an important financial planning tool that is increasingly valued by our ageing population.”

Alice Watson, head of marketing and insurance at Canada Life, added: “No-one could argue that 2020 has been anything but extraordinary across the whole of financial services.

“Today’s market statistics from the Equity Release Council show the industry’s remarkable resilience as it records a bumper Q4, following an increase in demand as lockdown restrictions eased across the country.

“From surveying equity release advisers, we know that there is a lot of optimism in the industry.

“In fact, 72% of advisers expect the value of the equity release market to grow even further this year, mainly driven by younger customers and an appetite for larger loans.

“While we are not yet at the levels of activity seen before the pandemic, 60% of advisers feel that Q2 2021 will see a return to pre-pandemic business.

“While releasing equity from a home remains a very significant decision, we know that families across the country are seeing new strains on their personal finances, whether that’s from redundancy, rising living costs or new caring responsibilities.

“For example, we know that 3.5 million grown-up children have returned to the family home adding on average £425 a month to living costs.

‘This collective strain is likely to continue being exacerbated by the pandemic and, with the right advice, equity release has proven it can help people to access their property wealth flexibly and safely.”

Lisa Martin, development director at TMA Club, said: “The later life lending market has handled the COVID-19 crisis extremely well, implementing the appropriate measures and safeguards to ensure that lenders and advisers could continue to support older borrowers in need of financial assistance, even while working remotely.

“Today’s statistics not only highlight the fantastic cooperation seen across the industry during this difficult time, but also show that market activity remained buoyant with attractive rates continuing to appeal to customers.

“Looking ahead, it will be vital that the whole industry continues to work together to ensure older homeowners who stand to benefit from unlocking their housing wealth have the opportunity to do so.

“This is where a joining up of all stakeholders is required, given that this customer segment can in many respects also be deemed vulnerable and more complex in terms of their personal and financial circumstances.

“Making sure advisers who support these customers have clear guidance and tools to serve their clients should be at the top of the agenda for lenders, distributors and other key players in the later life market, as this will ultimately lead to a greater number of positive customer outcomes.”