The number of homeowners taking out equity release plans rose five per cent in the second quarter of 2009, compared to the previous quarter.
According to the latest figures from SHIP (Safe Home Income Plans), the trade body which represents about 90 per cent of the equity release sector, equity release has become more popular as pensioners seek alternative incomes amid falling returns from savings and investments.
While the rest of the mortgage sector has fallen by approximately 50 per cent since the credit crisis began, equity release sales have fallen by less than half this figure, seeing 22 per cent fewer plans being taken out compared to 12 months ago, down to 5328 from 6864.
As interest rates have fallen to record lows, and pension incomes have steadily diminished, more are turning to equity release to increase their retirement income, with 5328 taking out an equity release plan in quarter two 2009, compared to 5074 in quarter one.
As retirees' priorities have changed from an extra holiday or other luxury to keeping up with essentials like bills, the type of equity release plan which accounts for the most sales has also changed.
The majority of customers chose a drawdown equity release plan last quarter – where the money is released gradually as income, rather than a lump sum – which represented 51 per cent of business in quarter two, a 14 per cent increase on the previous quarter.
While sales were up in the second quarter, the value fell in line with falling house prices and a shift towards drawdown equity release products.
The value of plans sold in quarter two totalled £232.9million, down from £245.01million in the first quarter of this year, which, SHIP says, is unsurprising despite the increase in the number of equity release customers.
The average amount of value unlocked from a home fell from a high of £48,287 in the first quarter, to £43,712 in the second.
Commenting on the figures, Andrea Rozario, director general of SHIP, said that the increase in sales is "encouraging".
"The quarter on quarter increase in the number of plans shows that consumers are once more starting to believe in the UK housing market," she said.
Dominic Fraser-Smith, group product manager for UK Life, Aviva, said that not only are the figures from SHIP encouraging, but could "herald the first glimmers of a recovery for the UK equity release market."
Mr Fraser-Smith also said that equity release offers the flexibility required by homeowners who want to access the value locked in their homes, and consequently he expects the market to continue to increase.
"We remain highly positive about this market and believe that we will see further growth in 2009," he added.
© Fair Investment Company Ltd
Equity release is not right for everyone - get advice and information to see if it suits your needs.