The equity release market will continue to grow, hitting £1.4 billion by the end of 2009.
According to Safe Home Income Plans
(SHIP), the body that represents more than 90 per cent of equity release providers, the equity release market will grow by £200million a year, reaching £1.4billion in 2009 and £1.7billion in 2010.
The fourth annual SHIP member survey shows that more than 90 per cent of providers think the volume of new equity release
business will increase next year by £200million; 67 per cent predict that one of the main drivers of growth will be interest rate reductions on equity release plans in the next quarter.
One of the main areas of growth in the equity release market predicted by providers is an increase in the number of drawdown equity release
Drawdown offers the same advantages of a lifetime mortgage
but instead of requesting the full sum of money available immediately the homeowner decides on a maximum amount of equity they want to release, and 'drawdown' the cash in stages when they need it.
Providers predict that drawdown will account for 70 per cent of the equity release market by 2010.
The SHIP survey found that while equity release providers
expect flexible drawdown and lifetime mortgages to increase next year, they do not think home reversion schemes will grow – in fact, 83 per cent said they think the number of home reversion schemes
sold will decrease or remain static during the first quarter of 2009.
"The wider economic situation means that 2009 will be an unpredictable year. Many repercussions from 2008 will continue to be felt across the industry as a whole," explained Andrea Rozario, Director General of SHIP.
"This survey has shown that SHIP members remain confident in the future of the equity release market, as they consider the long term prospects."
"The biggest issues facing 2009's equity release market are predicted to be falling house prices and a lack of consumer understanding of equity release products. The role that SHIP plays in increasing confidence and highlighting the benefits of equity release amongst both IFAs and consumers will therefore prove more important than ever in the coming year."
Sharon Bratley, Chartered Financial Planner at Fairinvestment.co.uk says that given the current economic climate, it is not particularly surprising that equity release providers are predicting massive growth in the market.
"People, especially pensioners, are finding that their finances are being squeezed so many are looking for ways to boost their income, and equity release is one of the ways in which older homeowners can do this," she said.
"By opting for an equity release plan, whether it be a lifetime mortgage or a drawdown plan, homeowners can start benefiting from the capital they have locked up in their homes without actually having to move.
"Falling house prices will of course affect the amount of money available, but equity release remains a popular option, which for many people makes perfect financial sense, especially now."
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