Equity release lending up 19% year-on-year

15 October 2009 / by Rachael Stiles

Equity release lending rose in the third quarter of this year, according to the latest figures from the equity release trade body SHIP (Safe Home Income Plans).

While the number of equity release plans taken out compared to Q3 2008 remained relatively stable, the average amount of equity that each household released from their home rose by 19 per cent year-on-year.

Despite a 2.5 per cent quarterly drop in the number of equity release plans taken out, from 5333 in Q2 to 5198 in Q3, there was a quarterly increase of 1.2 per cent in the total value released compared to the second quarter, and Q3 marked a two per cent increase in sales compared to the first quarter of 2009.

The third quarter showed an average increase of 3.9 per cent on the amount released from each home, rising from £43,746 in Q2 to £45,434 in Q3, which SHIP suggests could reflect a return of confidence in the stability of the housing market.

While the wider mortgage market has suffered a 63 per cent decline in lending during the last 12 months, the value of the equity release market has seen a comparatively small decline of 22 per cent.

However, the increase in the average amount released, year-on-year, has helped to compensate for a 35 per cent fall in the number of equity release plans taken out since this time last year.

Drawdown equity release has become the most popular type, accounting for the majority of equity release plans with a 52.2 per cent market share, up 4.6 per cent on Q2's figures.

After drawdown, a lifetime mortgage whereby the homeowner takes the equity gradually to boost their income, taking a lump sum is the second most popular form of equity release, accounting for 46.2 per cent of the market, while home reversion represented just 1.6 per cent of the equity release market in Q3, where part or all of the property is sold but the homeowner continues to live there.

Commenting on the figures, Andrea Rozario, director general of SHIP, said that despite the challenges of the last year, "it is encouraging to see how well the equity release market is holding up compared to the wider remortgage market."

Ms Rozario cited the ongoing funding issues facing the mortgage industry as the primary reason for the fall in number of equity release plans taken out.

"While equity release providers are experiencing high levels of customer demand, a significant impact on the quarter's business figures has been the lack of liquidity in the overall market which has restricted the lending activity of some providers and resulted in the withdrawal from the market of some others," she said.

Ms Rozario added that she would like to see the Government take a larger role in promoting equity release as one potential funding mechanism for retirement: "SHIP urges the Government to launch a review of equity release, and explore how it can take its appropriate place in the retirement planning sphere."

© Fair Investment Company Ltd

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