£290m equity released in Q1 2008

More than £290m was released from UK homes in Q1 2008, reveals Key Retirement Solutions.

The company’s Equity Release Market Monitor Report has found that while demand for plans fell 16.5% during Q1, the average amount released increased from £48,000 to £53,000, as more than 6,000 retirees took equity from their homes.

Dean Mirfin, business development director at KRS, says: “It has been a difficult start to the year for many people as the fall out of the credit crunch has hit home and we are faced with volatile and uncertain economic and market conditions.

“Unlike the mainstream mortgage market we have not seen an upheaval in either rates or the ability of providers to lend. This is testament to the fact that lenders are fully committed to the equity release market.”

KRS says it has seen demand for drawdown plans increase by 29% year-on-year with drawdown accounting for 62% of all plans taken out in Q1 2008.

After the regulation of home reversion started in April 2007 home reversion’s market share remains at 5% of all plans taken out.

Demand for standard lifetime mortgages has declined proportionally as a result from 54% to 33% of all plans taken out in Q1.

The report also shows the fall in the average age of customers from 69 to 68.

Northern Ireland leads the way showing a clear decrease from 67 in Q1 2007 to 65 in Q1 2008.

The report found that the main use for equity release in Q1 of this year was to make home or garden improvements (61%), followed by taking a holiday (35%).

But 33% used the equity to repay existing debts on loans or credit cards and a fifth used the cash to clear their outstanding mortgage. A further 15% used the money to pay regular bills.

Mirfin adds: “As more and more people are tightening their belts including banks and lenders alike it is no surprise that consumers are increasingly nervous about their finances.

“This highlights the need more than ever to seek independent financial advice, while equity release can provide financial relief it is not always the right option for everyone. By seeking independent financial advice you are not committing yourself but making sure you are looking at all options available.”