Equity release market records strongest start for four years

Largest amount of equity withdrawn on average since records began in 2002

Lump sum mortgages recapture market share at the start of 2013

23 April 2013:  The equity release market has registered its most successful first quarter in four years, according to figures from the Equity Release Council (The Council).

At £233.8m, the total value of equity release plans taken out in the first three months of 2013 was 17% higher than last year (£199.1m – Q1 2012). This is the strongest start the industry has recorded since 2009, and continues the growth from the last quarter of 2012 when the largest amount of housing equity was released in any quarter since the end of 2008.

Customers typically releasing £15,000 more equity than at the market’s peak:

The number of equity release plans taken out at the start of 2013 was slightly higher (3%) than the first quarter of last year.  The average value of plans also grew by almost £7,000 over the same period from £49,069 to £55,985: the highest figure since quarterly records began in 2002.

This also meant the average plan taken out in the first quarter of 2013 was nearly £15,000 larger than in 2007 (£41,348) when the market was at its peak [see Table 1].

Table 1: Typical amount of housing equity withdrawn

Q1 2013

Q1 2012

2007

£55,985

£49,069

£41,348

The trend suggests that the value of over-55s’ homes is rising again following the property market crash, and also that people are drawing on increasing amounts of these housing assets to support their finances in later life.

For a second successive quarter, independent financial advisers were responsible for 92% of the value of equity release plans agreed – their largest market share in the last decade.

Shift in emphasis between drawdown and lump sum:

The quarterly value of drawdown mortgages grew by 10% over the past year (£132.7m – Q1 2012 vs. £145.7m – Q1 2013). However, these products represented a smaller proportion of market value in the last quarter than in the first three months of 2012, while lump sum mortgages increased by 38% in value (£63.4m – Q1 2012 vs. £87.8m – Q1 2013) and gained nearly 6% market share over the same period [see Table 2].

Table 2: Comparing drawdown and lump sum mortgages

 

Drawdown mortgages

Lump sum mortgages

Period

Market share

Value

Market share

Value

Q1 2013

62.3%

£145.7m

37.6%

£87.8m

Q1 2012

66.7%

£132.7m

31.8%

£63.4m

Nigel Waterson, Chairman of the Equity Release Council said:

“The fact customers are accessing an increasing amount of equity shows just how important people’s housing assets are becoming to their financial wellbeing in later life.

“Recent parliamentary reports have flagged up the reality that many of our ageing population will struggle to meet costs in later life without a way to balance their books.  In the absence of a magic wand from Government, they will want to make the best use of the financial assets available to them – the biggest of which is usually their home.

“By consulting with one of The Council’s adviser members, they are guaranteed fair, expert, independent and easy to understand guidance on how equity release products can help their situation. Using independent solicitors to carry out legal work and verify their understanding gives consumers an added safeguard, so they can use their housing wealth to enjoy a more comfortable retirement.”

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