The equity release market has substantially increased in size in the first quarter of 2006, research from Key Retirement Solutions suggests.
According to Key Retirement Solutions the equity release market is up in terms of the number of plans and their value, with the value of equity release plans up 12% on last year at £310m in the first quarter up from £277m for the same period in 2005.
The trend towards a slight dip in the first quarter continued as the value of plans fell from £313m at the end of 2005 to £310m in the first quarter of 2006 and number of plans fell from 7128 in the fourth quarter of 2005 to 7087 at the start of this year.
Meanwhile the split between the various types of equity release products sold has changed dramatically from the beginning of 2005 to the beginning of this year. Drawdown plans now account for 53% (3760) of sales, a significant increase from 12% (718) a year ago.
The research claims the shift indicates strong consumer and adviser response to the launch of more flexible equity release products. But the number of plans sold by intermediaries only rose marginally with 4012 plans being sold at the end of 2005 compared to 4093 at the start of this year. Direct business fell also fell with 3115 plans sold directly by providers at the end of 2005 compared to 2994 at the end of the first quarter of 2006.
Dean Mirfin, business development director at Key Retirement Solutions, says: "The first three months is generally the slowest quarter in a year and a good indicator of how the market will perform. The fact that we have seen phenomenal annual growth combined with only a slight quarter on quarter dip bodes well for the market in the remainder of 2006.
"The increasing popularity of drawdown mortgages is unsurprising as they currently boast excellent rates and allow consumers to access the equity in their homes in phases - therefore reducing the overall cost and adding an attractive 'lifestyle' aspect to these products. We anticipate that drawdown mortgages, provided their competitive pricing is maintained, will continue to dominate the market as consumers realise their benefits.”
Mirfin also says there is a disparity between the value of equity release plans sold by intermediaries and those sold by the product providers themselves. He adds large companies are increasingly targeting their own more affluent customer bases for equity release sales and that this could be a real cause for concern in the future if the current trend towards direct products continues.
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