The number of people releasing equity from their homes is set to soar
- myfinances.co.uk can help you search the market and compare mortgages so you don’t have to. Fill in one simple form, tell us about yourself and the mortgage you're looking for and we'll help you find the best mortgage rates for your circumstances.
With savings and pension funds depleted by the recent economic turmoil, pensioners are looking for other ways to supplement their pension and many are using their house as a way of generating cash. More...
Equity release market to soar
Thursday, 11 May 2006 11:23
The equity release market, which allows people to draw down money from their homes without having to make repayments or move house, is set to soar in the next three years.
Products such as lifetime mortgages and home reversion schemes are growing in popularity with the British public, as house prices rise and pension funds dwindle.
But the major banks are holding back from the market, a new report from Datamonitor finds, preventing equity release from fulfilling its potential.
Some £1.1 billion worth of housing equity was released in 2005, and data from Ship (Safe Home Income Plans) shows that the equity release mortgage market was 11 per cent higher in the first three months of 2006 than in the same period in 2005.
And Datamonitor predicts that this niche mortgage sector could treble in size to £2.9 billion by 2010, growing by almost 25 per cent a year.
"There is now more willingness among consumers to consider using property to boost retirement income due to factors such as inadequate savings and pension shortfalls," said Datamonitor financial analyst Karina Purang.
"While this is a positive development for the equity release mortgage market, the industry needs to ensure that consumers are getting the best quality of advice possible before making a decision. At the moment, this is an issue."
Currently, Britons aged 50 to 60 have some £542.6 billion of equity built up in their homes, and by the time they retire this could be worth £1,425 billion, Datamonitor calculates.
And this group seems more willing than ever to use this to supplement their retirement, rather than pass it on to their relatives and the taxman.
But the major banks seem wary of offering people the facility to access this money though lifetime mortgages or other similar products.
"Consumer attitude towards inheritance and using home equity to fund retirement income is changing. This positions the equity release mortgage market as a sector with great growth potential and one where many lenders would want to be," Ms Purang said.
"By waiting too long, these lenders may face the risk of missing the boat."