New equity release goes through £200m barrier

Equity release has seen a rise in customer numbers and lending figures in the third quarter of 2011, according to SHIP, the equity release provider trade body.

New advances of equity release products by SHIP members were up 12% to £206.2m in the third quarter of 2011, up from £184.9m on the previous quarter, and the highest level of lending seen since quarter one of  2010 (£213.4m).

The number of equity release customers also grew by over 10% from 3,710 in the second quarter to 4,148 in the third quarter of this year.

SHIP says the growth shows that consumers are becoming increasingly aware of the benefits of accessing the money tied up in their home.

This increased awareness is being led by the adviser market, with intermediaries accounting for 88% (£181m) of new business – similar to the previous quarter.  While 12% (£25m) of customers bought equity release direct from a provider.

The flexibility of drawdown lifetime mortgages remained the most popular in equity release product in the third quarter, as it continued to account for the majority of market sales at 61% (£126m).

This is followed by lump sum lifetime mortgages at 36% (£75m), with home reversion schemes accounting for 2% (£5m) of all sales in quarter three.

The average amount released on an equity release product remained stable in at £49,703 compared to £49,830 in quarter two. However, this figure has risen 6% over the last year from £46,754 in quarter three 2010, a period where the average property would not have increased in value at the same rate.

With a new breed of impaired life equity release products entering the market, this rise could be attributed to people in ill health being able to raise a greater amount of equity from their home, or that people are borrowing more to help cope with the rising cost of living.

Andrea Rozario, director general of SHIP, said: “This has been an excellent quarter for the equity release market. Considering the wealth locked up in a property as part of general financial or retirement planning is essential, as it will continue to be the greatest asset most people have as they approach retirement.

“We feel that breaking the psychologically important £200 million barrier for new advances in Q3 is fantastic news for an industry that is recognised to have a huge latent demand.”

“While it is unlikely that we will see an immediate return to business levels recorded prior to the recession, we are confident that the market has started to turn a corner and we will return to more typical trading conditions.

“The UK population is ageing and with insufficient pension provision and the prospect of meeting significant care costs, we expect the demand for equity release products to increase significantly over the next few years.”