Market is ripe for new providers despite 2009 slide in business

1 February 2010 | By Natalie Thomas

A 14% drop in the value of the equity release market will not deter new entrants, says Dean Mirfin, group director at Key Retirement Solutions.

Safe Home Income Plans released its members’ business figures for 2009 last week, revealing that overall business fell from £1.09bn in 2008 to £946m in 2009.

The trade body’s members also saw the number of plans sold fall to 20,492 in 2009, down by 27% on 2008’s figure of 28,224.

But Mirfin is confident that 2010 will see new providers enter the market and old ones return.

He says: “A lot of lenders started to exit the market when house prices started to fall and they got unnerved. House prices are starting to come out of the trough now and it is less risky for new entrants.”

With the withdrawal of providers in recent times such as Prudential, Coventry Building Society and Northern Rock, Mirfin says the market is calling out for a niche player.

He says: “The demand is still there and even though there’s still plenty of good products to choose from, the withdrawal of some providers has left the door wide open for others.”

There were positive signs for the market in SHIP’s results. There were 4,888 equity release plans taken out in Q4 2009, just 1.9% down on the amount taken out in Q3.

On a product basis, the number of drawdown mortgages sold in Q4 increased 5% to 3,057.

There was also a 4% rise in the average advance, taking it up to £47,402.

There were 100 home reversions sales in Q4 2009, a 28% rise quarter on quarter.

Andrea Rozario, director general of SHIP, says: “There are encouraging signs, with both providers and IFAs recently reporting increasing demand from consumers. The funding issues that have constrained some providers and, in certain instances, forced withdrawal, appear to be abating.”