Over the first half of 2023, lifetime mortgage customers have become more open to releasing funds for more aspirational reasons – a trend that has remained consistent over initial advances, cash releases on drawdown plans, and additional borrowing via further advances – according to analysis conducted by Pure Retirement.

Among new customers, home improvements have remained the most popular reason for applicants to release equity, rising to 24% as a proportion of application volume from 22% in 2022. Similarly, mortgage and debt repayment has remained the second-most popular reason year-on-year, though in this instance dropping slightly to 21% from 22% in 2022.

However, releasing funds for a holiday has risen from the fifth most popular reason in 2022, to the third in 2023, pointing to increasing customer confidence and willingness when it comes to using released equity for lifestyle means – a fact backed up by car purchase remaining among the top five uses of funds year-on-year.

When it comes to drawdown customers, cash release usage continues to be dominated by home improvements – though with a drop to 40%, from 46% in 2022. Similarly, holidays remain the second most popular reason for released funds, albeit with a 2% reduction compared to 2022. Releasing funds to cover living expenses has entered as 2023’s third most popular reason to access a cash release, pointing towards existing equity release customers electing to use their reserves for more day-to-day reasons. As with initial advances, car purchase remains a top-five reason to release funds, holding its share of application volume but falling from the third to the fourth most popular reason.

For those taking out additional borrowing via further advances, home improvements again represent the most popular reason for releasing more funds, although holidays have jumped from the 4th most popular reason to the second. Year on year, creating an emergency fund and paying off debts have remained the third and fifth most popular reasons for additional borrowing respectively.

In spite of many predicting that there would be an uptick in gifting as a result of increased mortgage rates and the wider cost-of-living crisis that has yet to materialise in 2023. Among new customers, it’s now the fourth most common reason, down from the third in 2022, has remained the fifth most common use among drawdown customers, and has fallen from the second to the fourth most common use among those taking out further advances (with an attendant 4% reduction in terms of application volume). With most gifting being done to fund first-time home purchases, this could be linked to a cooling of the market as many wait and see whether residential mortgage rates are going to fall any time soon.

Scott Burman, Pure Retirement’s head of distribution, said: “These latest figures point both to the changeable nature of the market, and to the diverse customer base the later life lending sector currently serves. While staples such as home improvements and debt repayments have remained popular, the rising consumer interest in things such as holidays demonstrates the wide array of lifetime mortgage uses and increasing customer confidence to use released funds for these means.

“On the flipside, we’re also seeing a rise in people using their drawdown facility for day to day living expenses, highlighting the need for continued product innovation to ensure ongoing later life lending solutions that are able to meet a variety of circumstances and needs.”