Equity release used to unlock 16% more value from homes in recession

04 May 2009 / by Rachael Stiles

The first quarter of 2009 found equity release is remaining resilient in the continuing recession, with the average value unlocked from homes increasing by 16%, according to the equity release trade body SHIP (Safe Home Income Plans).

The figures from SHIP, which represents more than 90 per cent of the UK equity release market in terms of volume, reveal that the first quarter of this year saw equity release customers release 16 per cent more value from their homes than in the same period in 2008.

While the average number of equity release schemes taken out fell by 14 per cent year-on-year, from 5,892 to 5,074, equity release has delivered a "strong performance", SHIP said, compared to overall mortgage lending, which has fallen by about half in the same period.

The total value of equity release fell from £245.8million in Q1 last year to £245.01million in the first quarter of 2009 to the end of March.

But, the 16 per cent rise in the average value that homeowners released from their homes, from £41,718 in the first quarter of last year, to £48,287 in the same period this year, reflects the rise in the cost of living, coupled with a simultaneous fall in retirement income from pensions and savings.

"It is encouraging to see how resilient the equity release market is, especially when you consider the fact that consumers have become increasingly cautious about borrowing and the performance of the financial services sector as a whole," commented Andrea Rozario, director general of SHIP.

While house prices continue to fall, losing a further 0.4 per cent in April according to the latest Nationwide house price index, SHIP saw a Q1 jump in the number of lump-sum equity release plans (otherwise known as home reversion schemes), as opposed to drawdown equity release plans, which release equity gradually, providing a regular income.

This jump, says SHIP, is due to consumer concerns regarding further falls in house prices and savings returns, driving them to release higher amounts of equity from their homes.

"The relative stability of the market in such turbulent financial times is very pleasing," Ms Rozario continued. "There remains a clear need for equity release products, which is becoming ever more important as pensioners feel the pinch from the recession. We remain realistic yet positive about the next quarter's results, and expect to see exciting market and product innovations as companies adapt to meet the changing needs of their clients."

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