The equity release market edged closer to £1bn of activity in a single quarter as homeowners aged 55 and over unlocked a record £971m from their homes in Q2 2018, according to the latest quarterly figures from the Equity Release Council.

Total lending between April and June increased by 12% compared with the first quarter of 2018 (£870m) and by 39% year-on-year from Q2 2017 (£701m).

This quarterly increase was broadly in line with the average 11% growth seen from quarter to quarter since Q1 2016, as equity release has taken up a position as a mainstream financial solution in later life.

This steady growth has resulted from increased demand:  total customers served during Q2 rose by over a quarter (27%) year-on-year from 16,022 in Q2 2017 to 20,326, up 9% from Q1 2018 (18,586).

As a result, total lending in the first half of 2018 reached £1.84bn overall, up by 32% from H1 2017. The total number of customers served increased by 28% over the same period from 16,805 to 38,912.

The rise in activity during Q2 was driven by 11,295 customers taking out new plans, compared with 10,195 in the previous quarter and 8,454 a year earlier. This continues the trend for more over-55s to look to housing wealth to form part of their financial planning.

62% of new customers chose drawdown lifetime mortgages, allowing them access to equity from their homes in multiple instalments over time, which limits the interest owed.

38% chose a lump sum mortgage to receive a single payout instead, the largest share since Q1 2017.

The number of returning drawdown customers making withdrawals from their agreed ‘reserve’ funds also rose year-on-year in Q2. However, customers taking further advances on top of an existing plan dropped by 9% from 1,002 in Q2 2017 to 910 in Q2 2018.

The average amount of housing wealth unlocked by new customers fell slightly in Q2 compared with Q1 across both drawdown and lump sum lifetime mortgages. The average first instalment of a drawdown plan decreased slightly from £64,797 to £63,584, while the average new lump sum plan dipped from £96,483 to £95,991.

Total lending of £93m to returning drawdown customers was the largest quarterly amount on record – a result of the growing number of customers with these products. However, the average drawdown taken per customer in Q2 fell marginally from £11,756 to £11,532.

Average further advances fluctuated more from Q1 to Q2, but this was influenced by the small number of people active in this part of the market and remained in line with averages seen since 2016.

Home reversion plans continued to make up fewer than 1% of new plans taken out in Q2 2018, although lending in this part of the market exceeded £1m for the first time in two years since Q2 2016.

David Burrowes, chairman of the Equity Release Council, said: “The social utility of housing wealth is increasingly recognised at a consumer, industry and policy level. Property wealth has an important role to play as part of the solution to many pressing socio-economic issues, from boosting retirement incomes to funding social care and easing intergenerational pressures by helping people to pass on a ‘living inheritance’.

“Consumers are releasing money from their homes for a variety of reasons, and features like downsizing protection and repayment options mean today’s equity release product range is designed to evolve as people age and circumstances change. Growing choice and flexibility has propelled equity release into the mainstream consciousness, and it is crucial that consumers are encouraged to weigh up all the choices available to them, to help create a rounded approach to later life planning that considers property alongside pensions and other assets.”

Steve Ellis, CEO at Legal & General Home Finance, added: “£1bn of lifetime mortgage lending in a quarter is just around the corner. More and more older borrowers are switching on to the benefits of unlocking housing wealth to fund better retirement outcomes.

“Lifetime mortgages are now a mainstream solution for retirement funding and L&G Home Finance as the market leader is knocking on the door of the UK’s top 20 mortgage lenders. We should expect to see a £10bn market within the foreseeable future and we need more advisers to come to market and start helping clients with lifetime mortgages.

“The customer demand is there, the lending capacity is there – as long as customers can access the right advice then the lifetime mortgage market will continue to thrive.”