Equity release sales up for first time since 2007

17 January 2011 | By Natalie Thomas

Key Retirement Solution’s 2010 Equity Release Market Monitor shows an increasing use of drawdown has reversed three years of market decline in the equity release market.

The total number of new plans rose to 22,020 compared with 21,305 in 2009.

However the rise in popularity of drawdown plans –which now account for nearly three-quarters of all sales compared with two-thirds in 2009 –meant the amount of housing wealth released by homeowners fell 11% to £910.6m from £1.02bn in 2009.

Key Retirement Solutions says customers taking out drawdown plans benefit from lower borrowing costs because they are able to draw funds when required in tranches when they need it rather than in a one-off lump sum, as a result the average amount released reduced to £43,519 from £48,212.

And the increased confidence in the use of equity release plans was reflected in more customers using housing wealth to improve their homes and gardens or to go on holiday.

They were the two most popular uses for cash last year. Repaying debt and helping the family with their finances still rank highly as popular reasons for releasing equity.

Some 59% of customers used some of the money to carry out work to their home and/or garden in 2010 compared with 56% in 2009 and 34% used equity release for holidays last year compared with 33% in 2009.

Almost one in four - 23%, continue to prioritise helping out their families who may well be struggling more as a result of the economic crisis.

Dean Mirfin, group director at Key Retirement Solutions, says: “Customers are benefiting from the flexibility and favourable terms offered by drawdown and overall the equity release market was able to end three years of decline last year in the number of plans sold.

“The true barometer for the industry clearly rests with the number of plans sold rather than total amount released. The products available to consumers today naturally make equity release a more attractive option through the overall flexibility available and greater control over the cost of borrowing.

“Drawdown is now realising it’s potential in the equity release sector and still remains as one of the greater product innovations that the market has seen.

“Innovation by providers including the launch of products offering enhanced terms for customers with medical or lifestyle conditions plus increasing use of drawdown all adds to more competition among providers which points to further potential growth in 2011.”

Across the country seven out of twelve regions saw growth in the total number of plans sold, of those five regions experiencing falls these were mainly single digit declines apart from Wales who suffered a 23% drop.

Of those regions experiencing increased demand Scotland recorded the highest increase with a rise of 27% in total plans sold, closely followed by the North with and increase of 23%. However just the North and Scotland saw increases in the total value of equity released.

Single advance lifetime mortgages made up 23% of sales in 2010 compared with 33% in 2009 while reversions remained steady at around 3% of total sales. Drawdown accounted for 74% compared with 64% in 200

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