Equity release demand up 5%

Thursday, 16 July 2009 06:42

Demand for equity release rose five per cent in the second quarter of 2009, data from the industry revealed today.

A total of 5,328 new equity release customers were recorded by trade body SHIP.

However, the level of those turning to their homes is down 22 per cent from a year ago.

House price falls have also seen the value of equity release deals fall five per cent.

Andrea Rozario, SHIP director general, said: "While the equity release market is still suffering along with the mainstream mortgage market, it is encouraging to see that the equity release market is starting to see evidence of some positive movement.

"The quarter on quarter increase in the number of plans shows that consumers are once more starting to believe in the UK housing market."

She added barriers still remained over equity release, there remained "a clear need for equity release products - especially in the current economic environment".

Dominic Fraser-Smith, group product manager for UK Life at Aviva, said the figures "heralded the first glimmers of a recovery for the UK equity release market".

The SHIP data also pointed towards growth in drawdown mortgages - where access to equity in a property can be more flexible than traditional equity release - with sales up 14 per cent to account for 51 per cent of the market.

"The flexibility offered by this product is ideally suited to how many of today's consumers want to access their housing wealth and we expect that its market share will continue to increase in the future," said Mr Fraser.

Claire Barker, chairman of the Equity Release Solicitors' Alliance (ERSA), explained drawdown products were seeing gains as people were reticent about leaving large amounts of cash in bank accounts earning little interest.

"It will be interesting to see if the trend for smaller amounts continues, as more homeowners seek to use equity release products to repay existing mortgages or to consolidate their debts, as survival in retirement becomes increasingly challenging," she said.

"The findings confirm that homeowners are increasingly comfortable with the concept of equity release and, provided that they are properly financially and legally advised by specialists in this sector, more and more homeowners are likely to see their properties as a safe, convenient and independent way of funding their retirement."

• Tags:
• equity release mortgages
,
• news