Equity release follows house prices with 24% fall

16 April 2009 / by Rachael Stiles
The equity release market has fallen 24 per cent, largely as a result of falling property values, according to new figures from Key Retirement Solutions.

While the number of equity release plans taken out has fallen by a modest seven per cent, a 16 per cent drop in the value of homes being used for equity release has caused the total value to fall 24 per cent in the first quarter of 2009.

The Key Retirement Solutions Market Monitor has revealed that the value released from homes through equity release totalled £183million in the first quarter of this year, down markedly on the same time last year, when homeowners unlocked £240million from their properties.

While a seven per cent fall in the number of equity release schemes taken out will have had an impact, down to 4,703 from 5,059 last year, the fall in house prices, which has been felt across the UK property market, has had the most significant impact.

Signifying the largest fall since Key Retirement Solutions started recording results in 1999, this can largely be explained with the 16 per cent fall in value of the homes being used for equity release, says KRS, with the average property now worth £193,335, having fallen from £234,931 in quarter one of 2008.

Consequently, KRS has reported a 15.33 per cent fall in the average proportion of value released from each property with equity release, down to £44,948 from and average of £53,084 in the same quarter the previous year.

However, the effect on the equity release market has not been as keenly felt as in the wider UK property market, which, according to the Halifax House Price Index for March, has seen property values fall 17.5 per cent year-on year, while the Council of Mortgage Lenders has revealed mortgage approvals were down 60 per cent in February compared to the same time last year.

Dean Mirfin, group director of Key Retirement Solutions equity release, said: "Whilst the total number of plans fell by just over 7% the dramatic fall in lending figures is impacted most by the fall in property values."

Mr Mirfin added that while first quarter results for this year show a slight decline, demand for equity release remains strong.

He added that the decline in the number of equity release plans being taken out could be accounted for by people waiting for house prices to improve again, but urges homeowners to make the most of the cash locked in their homes now.

"Those considering equity release may be waiting for property prices to improve, but this could well prove to be a false economy," he said. "We only get one chance at retirement and it is important that those considering equity release do not delay, time is something we can't buy back."

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