Equity release sales rose 19 per cent during the third quarter of 2009 compared to quarter two, the latest figures from Key Retirement Solutions reveal.
More than 6,000 pensioner households took out an equity release plan in Q3, the latest Equity Release Market Monitor from KRS shows – 1,000 more plans than in Q2, which also saw an increase in sales, up nine per cent on Q1.
Total lending for equity release was up 13 per cent to £214million, while depressed house prices were reflected in the average four per cent decline in the value of each plan taken out compared to the preceding quarter.
Drawdown equity release accounted for 65 per cent of all plans taken out in Q3, as pensioners move to boost their income rather than taking the cash in one lump sum.
Another reflection of the current economic climate can be seen in analysing the most common uses for equity release, with the number of homeowners using the money to repay an existing mortgage or other debts rising from 15 to 23 per cent and 29 to 36 per cent respectively.
Home improvements remain the most popular motivation for pensioners releasing equity from their homes, representing 53 per cent of all equity release plans taken out in Q3.
The report also shows that while equity release lending levels are still lower than before the credit crunch, they have not been affected as adversely as the wider mortgage market and the sector is showing signs of improvement; the number of new plans taken out is down 15 per cent on Q3 in 2008, but this is up from a 17 per cent decline in Q2 2009 on last year's figures.
Dean Mirfin, group director at KRS, said: "The continued growth in the number and value of plans throughout 2009 is very encouraging. Pensioners are hard hit by the current climate, experiencing higher rates of inflation and previously unknown low levels of returns on their savings, as a result equity release is providing a strong support for those who want to maintain a good quality of life in retirement."
Mr Mirfin said that KRS expects the final quarter of 2009 to show equally strong growth in the equity release sector as confidence continues to return to the market.
Commenting on the lenders which have withdrawn from the equity release sector recently, such as Saffron and nationalised bank Northern Rock, Mr Mirfin said that the market will pick up and draw lenders back to equity release:
"Whilst a number of providers have temporarily had a break from the market of late we expect that a number will soon return, stronger and wiser. The demand for greater income or capital in retirement is continuing to grow and as a result equity release has to be a serious consideration for anyone who wishes to boost their provision in, or approaching, their retirement."
© Fair Investment Company Ltd
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