The total number of mortgage take-outs by people over 56 has fallen by 52% since 2005 to 84,576 last year, according to the Equity Release Council (ERC).
ERC says: “At a time of significant product innovation […] unmet demand will need to be addressed as the market recovers.”
The increasing lifespan means that the number of people over 56 has grown by 31% since 2005 to almost 21 million. However, mortgage approvals have followed a different trajectory, with fewer older borrowers taking out products.
In 2005, one loan was completed for every 91 people aged 56 and over in Britain, but by 2023 this rate dropped to one completion for every 246 people.
During the post-credit crisis recovery of the past decade, the council’s analysis shows that the number of people taking out lifetime mortgages has grown in every region of the UK except the North East, which itself will see significant growth until 2022 knew.
Of the twelve regions, eight recorded double digit growth between 2014 and 2023.
Regions with the strongest growth rates included Wales, which saw growth of 44%, East Midlands with 23% and East of England with 21%.
While lending has been subdued this year, ERC says product availability in the stock market has recovered as 2024 progresses.
The council’s analysis of AdviseWise data shows that there were 212 more product launches than there were withdrawals between August and October.
Interest rates have also stabilized, with average annual interest rates for new lifetime mortgage products hitting a low of 6.31% in September 2024, an improvement on averages of more than 7% last year.
Despite fluctuating economic conditions, Loan-to-Value (LTV) ratios for lifetime mortgages at age 70 have returned to pre-pandemic levels.
ERC Chairman David Burrowes says: “While lending volumes may be subdued for now, there is no denying that the post-regulation era has seen tremendous progress in equity product design and distribution, advice and public perception. ”
“We know that the current recovery will be a gradual process, with no overnight return to the £6 billion-plus market of recent years. At the same time, there is the potential to go well beyond this high water point in the future, and it is important that we turn this reset period into a positive one.
“Property assets have long been one of the most important assets available to British households. Advances in the design of lifetime mortgage products have made their access significantly more attractive and are likely to be seen in the coming years as a major milestone in bridging the gap between residential homeowner mortgages and the later life insurance market.
“The pause in growth provides an opportunity to focus on the next steps needed to create the sustainable senior mortgage market of the future that our aging population desperately needs. In a climate of increasing pension challenges, real estate assets will play a crucial role in bridging the gap between aspirations and affordability in later life.
“The council is focused on working with industry, regulators and policymakers to ensure consumers receive the best advice and can make informed, confident decisions about their financial future.”