Demand for equity release products fell during the first quarter of 2008, possibly due to uncertain economic conditions, according to Key Retirement Solutions (KRS).
However, the average amount of equity released by homeowners has grown and the popularity of drawdown plans continues to grow.
The latest KRS market monitor found the total number of equity release plans sold in Q1 2008 was 6,009, down 16% from 7,196 in the final quarter of 2007.
Dean Mirfin, business development director at KRS, comments: “Gross lending on traditional home loans is down 6% year on year in February alone, and it is unsurprising that we have also seen a slight downturn in the number of equity release plans taken out across the whole of the first quarter this year, compared to last year.”
However, Mirfin says the market is still performing strongly, with over £290m released from UK homes during the first quarter of 2008, though this was down from £321m in the last quarter. The average amount of equity released increased from £48,000 to £53,000.
Drawdown plans have continued to grow in popularity, according to KRS, with a 29% year on year growth in the number of plans taken out. Drawdown now accounts for 62% of all plans taken out in the first quarter of 2008.
“One of the benefits of a drawdown plan is that you only pay interest on the amount released, so interest could accumulate more slowly than with a regular lifetime mortgage,” explains Mirfin.
“As such, it does not come as much of a surprise that more and more retirees looking to release equity from their home choose this as their preferred plan.”
KRS also found that the average age of an equity release customer has fallen drastically over the quarter, now sitting at 65 years old, compared with 67 years three months ago.
Mirfin says the changing face of the market, and the economic uncertainty caused by the credit crunch, means it is more important than ever for consumers to seek independent advice before opting for an equity release plan.
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