Over 15,000 lifetime mortgages (equity release for older home-owners) with a value of £693 million were advanced in the second half of 2004, according to the latest survey results published by the Council of Mortgage Lenders. This brings the total number of outstanding lifetime mortgages to over 83,300 and their total value to just under £4 billion.

The recent Institute of Actuaries report on equity release estimated that people over 65 hold more than £1 trillion in unmortgaged housing wealth. This suggests there is the potential for a significant expansion in equity release lending.

However, growth so far has been constrained by caution on the part of both consumers and lenders. Consumer research for the CML last year suggested that people currently in their 40s and 50s are much more likely to tap into their housing equity in old age than those currently aged 65 or over.

On this basis, lending of around £2 billion per year looks likely within the next five years. But, if more large lenders decide to offer lifetime mortgages, and consumer attitudes change to reflect the changing environment, the market could expand to the £5 billion a year predicted in the Institute of Actuaries report.

In recent months, a number of new initiatives have strengthened the equity release market for the future. Since 31 October lifetime mortgages have been subject to their own specific FSA requirements. And the CML has produced a set of good practice notes for the sales process, to help advisers comply with the FSA rules. The CML has also produced a leaflet to describe the main potential impacts on tax and benefits that taking a lifetime mortgage might bring, and has developed a software solution to enable those selling lifetime mortgages to calculate the impact on their clients' own specific circumstances.

Jackie Bennett, CML Senior Policy Adviser, commented: "Equity release lending grew by 10% in 2004. This followed an exceptional 70% growth rate in 2003. The slower growth last year probably reflected uncertainties on the part of both lenders and consumers in advance of mortgage regulation."

"However, with such a huge pool of untapped housing wealth among older home-owners, many of whom may be disappointed with their pension provision, it is clear that there is a potentially huge market for responsible lifetime mortgage lending. With the comfort of mortgage regulation, both lenders and consumers may now have the reassurance they need to consider making more use of equity release."