Lifetime mortgage market jumps 31%: Responsible Life

According to data from Responsible Life, the amount of equity released by lifetime mortgage customers has jumped 31% in one year, driven by a “rush to the middle class”.

The end-of-life mortgage broker says the average amount released by its clients over the past 12 months rose from £86,000 to £112,700 in April.

He says: “The cause of this change is the growing popularity of life mortgages among wealthier homeowners who have ‘tamed’ historically low interest rates and the increased standard of living that capital release can bring. Lifetime mortgage rates have more than halved in recent years to less than 3% in many cases.

The broker adds: “This shift towards a more affluent audience is confirmed by a simultaneous increase in the average value of properties that are presented for underwriting.”

The average value of homes used to secure lifetime mortgages, it says, is 19.4 per cent higher than a year ago, at £487,000, nearly double the average house price in the UK of £256,405.

House prices rose over the same period – rising 10.2% on the year to March. But the broker says that’s not enough to explain the change.

Even after accounting for house price inflation, the average value of mortgaged properties was still 8.2% higher.

It says lifetime mortgages are attracting wealthier customers, who are increasingly using the release of equity to “give money to children and loved ones, renovate their homes, pay off existing interest-only mortgages and fund their retirement.

The broker adds that “a pandemic boom in home improvement, buoyed by the extra time people have been forced to spend at home during repeated closings, has helped drive up the level of borrowing. Home improvement remains the second most popular reason to use a lifetime mortgage.

Responsible Life Chairman Steve Wilkie said: ‘There has been no doubt that there has been a middle class rush for lifetime mortgages over the past year thanks to interest rates which have dropped to historic lows.

“Wealthier homeowners have caught on to the falling rates and now see life mortgages as an affordable way to improve their standard of living in retirement. Gone are the days when they were considered a product of last resort.

“The pandemic has also played its part in increasing the level of borrowing. Repeated lockdowns have not only spurred huge housing demand, but there has also been a home improvement frenzy.

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