Equity release sales up 5% year-on-year in 2011
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The number of equity release plans sold in the first half of 2011 increased by 5.24% compared to the same period last year, its first rise since 2007, according to research from Key Retirement Solutions.
There were 10,448 plans sold between January and June 2011, while the value of lending increased from £449m to £463m, a rise of 3.12%.
Drawdown equity release products accounted for 75% of the market in H1 2011, compared to 72% in H1 2010, and Key Retirement Solutions says when the dominance of drawdown products is taken into account, equity release lending has returned to 2006 levels.
Dean Mirfin, group director at Key Retirement Solutions, says: “The really significant fact which the industry has overlooked is that drawdown has changed the market forever.
“If factored into total sales, it would take us back to the 2006 peak levels of lending when single, higher, advance business was more prolific. Total lending inclusive of drawdown facility is £660m for the first six months of this year.”
He says this is because the analysis reveals there are undrawn funds of £197m among those who took out a plan in H1 2011.
The research also shows that home and garden improvements remains the most popular use of equity release, chosen by 59% of respondents, while 20% use it to pay off outstanding mortgage debt, up from 17% in 2010.
Mirfin puts the rise in the number of people using it for mortgage debt down to the rise in divorce levels among those aged 50 plus, an increase in endowment or investment failure, and a rise in living costs meaning many are paying a mortgage that is taking too large a share of their retirement income.
He says he definitely expects the proportion of equity release borrowers using it to pay down mortgage debt to increase in the coming months and years.
Mirfin says: “5% growth in the number of people taking out equity release is higher than we expected, and equity release providers definitely have the capacity to do more business.
“I think we will see more providers returning to the market, but building societies in particular are faced with a real challenge, as although many would like to come into the market but they just do not have the funds.”
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