Equity release market records strongest performance since 2009

Appeal of drawdown products fuel continuing market growth

17 January 2013:  The equity release market has enjoyed its most successful year for three years in terms of both volume and value of sales, according to year-end figures for 2012 from the Equity Release Council (The Council).

Average value of equity release plans hits a 14-year high:

The total value of the market increased by 17% to £925.7m in 2012, up from £788.6m in 2011. At £52,191, the average value of equity release plans was higher than in any year since 1998, reflecting the fact that more people are carrying mortgage and credit card debt into retirement and seeking to address outstanding balances on products including interest-only mortgages.

There was a 10% annual growth in the number of plans sold in 2012, with sales via independent financial advisers accounting for the largest share of the market (91% value and 88% volume) since this measure was first recorded in 2003.

Drawdown mortgages seize market share:

Drawdown mortgages continued to grow in terms of their share of market value during 2012: increasing from 49% (£465.4m) in 2009 to 66% (£610.0m) last year.  The rise in the average size of equity release plans suggests that people are taking higher initial lump sums from these products to help rebalance their finances.

Drawdown products accounted for 13% greater volume (12,500 plans) and 27% greater value (£610.0m) in 2012 compared with the previous year, when 11,000 plans saw £480.1m of equity released.

The total value of lump sum mortgages registered a more modest 5% growth in volume (from 4,800 to 5,000 plans) and 7% in value (from £291.0m to £310m) between 2011 and 2012. They currently make up 33% of the total market value compared with 49% in 2009.

Share of market value:

Drawdown mortgages

Lump sum mortgages

2012

66%

33%

2011

61%

37%

2010

56%

42%

2009

49%

49%

 

Strong performance in the final quarter of 2012:

The overall figures for 2012 were boosted by a strong final quarter, when the value of the market (£253m) was higher than in any quarter since the end of 2008.  A 2% rise from the third quarter of 2012 made it the third successive quarter where the market value has increased, with it being 17% higher than the equivalent period during 2011.

Andrea Rozario, Director General of the Equity Release Council said:

“These figures are a great conclusion to what has been a landmark year for the Equity Release Council, having relaunched with a new identity and extended the reach of our membership to include more representatives and interest groups from across the market.

“The ongoing debate over issues like later life finances and the cost of elderly care has already grabbed the attention in 2013.  But the growth of the equity release market over the last twelve months is a really positive sign that people are making proactive moves to get the best use out of their housing equity.

Nigel Waterson, Chairman of the Equity Release Council said:

“These figures show that there is a growing demand for regulated equity release products from reputable providers who abide by standards set by the Equity Release Council.”

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