The UK equity release market has defied the credit crunch and housing market slowdown with demand up 9% in 2007, according to Key Retirement Solutions (KRS).
The amount of equity release business passing through intermediaries has also increased, with less than 40% of consumers going directly to providers. This is the equivalent of around 6,000 plans moving to intermediary arrangement.
Figures from KRS’s Equity Release Market Monitor also show retirees in the UK released more equity than ever before in 2007 and home reversion plans became particularly popular as the dynamics of the housing market begin to change.
In total, retirees released almost £1.4bn of equity during 2007, up by almost a quarter compared with 2006 and overall demand increased 9%.
The research also found the average age of a retiree was falling, down from 69 in 2006 to 68 in 2007, as more plans became available for those aged under 60 and higher living costs prompted more people to release equity early.
Dean Mirfin, business development director at KRS, says: “The second fall in the average age of an equity release consumer confirms our prediction last year that, as an increasing number of retirees do not have sufficient funds to live comfortably in retirement; more and more are turning to the assets tied up in their homes to supplement their income.”
Drawdown plans, which allow clients to take the cash in their home in stages, became particularly popular in 2007, while lifetime mortgages saw a fall in popularity.
Lifetime mortgages made up 43% of all plans in 2007, compared with 69% in 2006, while drawdown more than doubled its market share, accounting for 51% of plans in 2007, up from 23% last year. Home reversion plans remained relatively stable following regulation earlier in the year, down from 7% to 6%.
“The increase in the drawdown facility is in line with predictions as many consumers prefer the option due to the cost advantages of the product, and consumers feel more in control of their money, choosing to make withdrawals as and when they need to,” explains Mirfin.
He says reversion plans are likely to remain popular if property markets exhibit low or negative growth, as the plan provider takes a share of the property, which could fall in value, rather than giving out a loan with a fixed price.
KRS says the equity release market is likely to see continued growth in 2008, despite problems in the property market, with more consumers seeking independent advice on which plans are available as the marketplace becomes more complex.
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