The equity release market is set to break the £1 billion barrier this year after a strong third quarter saw plan sales and total lending climbing by up to 11%, according to analysis from Key Retirement Solutions.

Total lending rose to £256.6 million in the three months to September 30. The independent equity release adviser said it would have topped £383 million if £126.5 million of untapped drawdown funds which have yet to be released are added in.

Plan sales rose 10% to 5,260 in the three months compared with 4,779 for the same period of 2011 while growth in total lending was 11% from £230.8 million in the third quarter of 2011.

Around 19% of customers used some or all of the cash to pay off mortgages.

Total funds released for 2011 were £959.6 million, according to Key Retirement Solutions’ Market Monitor, after the first year of growth since 2007 and this year is on track to beat that total.

Drawdown made up 70% of total sales in the third quarter compared with 29% for lifetime mortgages and just 1% for reversion plans.

“The ongoing squeeze on pensioner income and the ticking time bomb of interest-only mortgages are making the case for equity release,” said Dean Mirfin, group director at Key Retirement Solutions.

“Continuing innovation in the market with the launch of plans designed to tackle interest-only issues as well as enhanced products for people with medical and lifestyle conditions underline how the market is expanding.

“The formation of the Equity Release Council is also helping drive expansion by ensuring all parties involved in the market work together.”

Home and garden improvements remained the most popular use of equity release cash – 53% of customers used some or all of the cash for that with 18% using money to clear debts and 29% to help fund holidays, and almost one in three are using funds released to help out members of their family with their finances.

Across the country nine out of 12 regions saw growth in the total number of plans sold with Northern Ireland seeing growth of 75% with the North and London both recording rises of 34% and 35% respectively. Yorkshire & Humberside saw a fall of 9%.

The biggest growth in total value released was in Northern Ireland where total value nearly trebled while Scotland saw totals climb by 65% and the North by 45%. In total 9 out of 12 regions saw increases.