Newcastle Building Society has announced a 25 per cent year-on-year increase of equity release business.
Reflecting the fact that pensioners are having to find other ways of financing their retirement in a climate of falling savings and pension rates, equity release is becoming increasingly popular.
Following market trends, December was Newcastle Building Society's best month to date for equity release enquiries.
The majority of NBS' equity release business continues to come from drawdown equity release, whereby homeowners can draw the money they have release from their home in stages, rather than taking it all at once.
This allows homeowners to access the cash locked in their property, as and when they need to, without moving home, thus increasing their income while retaining ownership of their property.
NBS is optimistic about the equity release sector in the coming year, but says that in 2009 providers should concentrate on providing an advice-led approach to ensure that people are getting an equity release scheme that is right for them.
In the current recession, getting advice is more important than ever, the building society said, and should focus on a number of important factors.
Falling house prices are a concern to homeowners considering equity release and one that should be addressed, says NBS, but decisions should be based on a long-term outlook, by which time it is hoped that the market will have recovered.
All equity release plans from providers who are registered with SHIP (Safe Home Income Plans), which represents the industry, will come with a 'no negative equity guarantee', which ensures that customers will never owe more than their home is worth.
Advice should centre on customers getting the best deal for their individual circumstances, NBS stressed, taking into account falling interest rates and the fact that the customer may wish to move to a different provider; they should therefore be made aware of any potential redemption charges.
NBS "remains bullish about the future of the equity release sector," said Bob Mottershead, retail sales executive at Newcastle Building Society.
While he warns brokers against encouraging customers to take out an equity release plan if it is at all unsuitable for them, he said that "this optimism is fuelled by 2008 business which was a record year for the Society, and, combined with decreasing lead times and a growth in product options, there is little reason why equity release cannot continue to grow."
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