How has the equity release market fared in the last 12 months?

Drawdown mortgages are growing in popularity

Equity release is evolving into an important product for those planning their retirement, with poor returns from pensions forcing people to explore other avenues to supplement their income.

Various pieces of research in recent weeks have shown the market is in relatively good health as more homeowners realise the benefits of products such as lifetime mortgages, drawdown mortgages and other products.

So how has the market fared overall in the last 12 months? According to statistics from the Equity Release Council, the sector is going from strength to strength.

Research conducted on behalf of the body found that over the second quarter in 2012, both the value and volumes of equity release products provided experienced significant growth.

During the second three months of the year, £224.8 million of advances were made, 22 per cent higher than during the same period 12 months earlier and up 13 per cent on the first quarter of 2012.

The research showed that the number of products sold grew six per cent on the previous quarter and 16 per cent on the second quarter of 2011.

At the height of the property boom, lifetime mortgages were the most popular equity release plans advanced, allowing homeowners to withdraw large sums from their property.

However, in the current economic climate, consumers are finding drawdown mortgages a more attractive proposition.

The Equity Release Council research showed that drawdown products accounted for 68 per cent of the market in the second quarter of 2012, while lifetime mortgages have a 32 per cent share. Home reversion plans accounted for one per cent of sales.

Drawdown mortgages have now grown more than 48 per cent in the last three years, the council noted, adding that consumers seem to prefer withdrawing small amounts over a longer period of time as opposed to taking a single one-off sum.

Director-general of the Equity Release Council Andrea Rozario said: "We've seen the market start to evolve and more people are choosing drawdown products rather than lump sum plans as they choose to release equity strategically to pay for specific expenses."

If you are concerned about how much you will have to live on during your retirement, equity release is something you could take into consideration.

It is vital that if you pursue this course of action, you speak with an equity release adviser to find out how each product works and which is most suitable for you.