The rapid growth seen in the equity release market during 2022 showed signs of running out of steam in the fourth quarter, according to figures from the Equity Release Council (ERC).

Total lending for 2022 reached £6.2bn, up 29% on 2021, but the £1.36bn for Q4 represented a 20% dip on the previous quarter. According to the ERC, this bucked the usual trend whereby Q4 is the busiest quarter of the year.

The equity release sector served 93,421 clients in 2022 – an annual rise of 23% and higher than the previous record of 85,497 in 2019. There were 49,285 new plans agreed in 2022, which represents a 20% annual rise. The number of new drawdown customers rose 16% on the previous year.

David Burrowes, ERC chairman, commented: “Factors outside the industry’s control meant 2022 ended on an unusually quiet note in December, after the mini-budget fuelled rate rises and tightening criteria. However, releasing equity is not a choice to make on a whim, and we are encouraged by signs that customers are pausing to assess their options.”

Les Pick, director of manufacturing and adviser propositions at More2life, said the figures showed the future for the market “looks bright”.

He added: “With the number of returning drawdown customers growing in 2022, it is clear that many borrowers look to this market not as a short-term fix, but a long-term solution that can help them to enjoy their retirement or support younger relatives with their own homeownership ambitions.

“That said, the impact of last year’s mini-budget is evident in the figures recorded in Q4 and suggests that while equity release continues to be an attractive option for many borrowers, the shape of the market is changing. In the current higher interest rate environment, we do expect borrowers to be more cautious around the reasons they borrow as well as how much they take out.”

Stuart Wilson, chair of Air Club, commented that, given the cost-of-living crisis and affordability challenges in the residential mortgage sector, over-55s will be looking to the equity release market for support in 2023. “However, this is likely to be different from what they may have considered in January 2022 and product flexibilities such as the ability to make ongoing interest repayments become more attractive than ever before,” he said.

“While there is no doubt that 2023 will be more challenging for the market, there will be more opportunities for advisers to support customers than ever before,” Wilson added. “We would anticipate an increase in 2023 of customers, but likely borrowing a lower average amount as advisers counsel their clients to control debt if possible.”