The amount of money lent through equity release has jumped by 12 per cent in the three months to September, according to trade body Ship.

The growth shows consumers are considering equity release as an essential part of retirement planning, Safe Home Income Plans says.

More than £206 million was lent to homeowners in the third quarter, up 12 per cent from the £184.9 million lent in the three months to July. According to the trade body, it’s the highest level of lending seen since the first quarter of 2010, where lending topped £213 million.

Meanwhile, the number of equity release customers increased by over 10 per cent to 4,148 in the third quarter.

Product-wise, drawdown lifetime mortgages continue to dominate the market, accounting for 61 per cent of total equity release sales over the period. Lump-sum lifetime mortgages followed with 36 per cent, while home reversion schemes accounted for just 2 per cent of all sales in the third quarter.

In addition, the average amount released through equity release is £49,703 over the quarter, an increase of 6 per cent year-on-year.

Andrea Rozario, director general of Ship, says the equity locked up in property is still the greatest asset most people own as they approach retirement.

‘While it is unlikely that we will see an immediate return to business levels recorded prior to the recession, we are confident that the market has started to turn a corner and we will return to more typical trading conditions,’ she says.

‘The UK population is ageing and with insufficient pension provision and the prospect of meeting significant care costs, we expect the demand for equity release products to increase significantly over the next few years.’

Richard Eagling, editor of Investment, Life & Pensions Moneyfacts, says the increase in demand comes at a time when elderly homeowners are ‘struggling to cope’ with the rising cost of living.

‘Given the extent of the pensions crisis and the fact that many retirees are finding it difficult to fund their retirement, accessing the money tied up in their home is the only sensible choice left,’ he says.

He adds: ‘With the babyboomer generation now hitting retirement we are likely to see even more individuals embrace equity release as an alternative means of providing income in retirement.’

What is equity release?

Equity release is a way of releasing money from your home, while still being able to live there. It is typically available to those aged between 55 and 70, meaning it’s often used to enhance pension income.

There are two main types – the lifetime mortgage, or the home reversion plan. The former works like a standard mortgage, which rolls up and the interest is paid on death. A home reversion plan involves a company buying all or part of the property at between 20 and 60 per cent of its market value, which it will then sell when the owner dies.

Equity release is usually a last resort, as one of the main criticisms is that children are left little or no inheritance.