Advances Increase by 10% in the Last Year:
In Q1 2012, total advances of £199.1m were made by SHIP members – an increase of 10% on the same period of last year (£181.6m – Q1 2011). The number of plans also increased year on year by 6% to 4,057 from 3,838.
Typically, we see a fall in the number and value of plans sold between Q4 and Q1 as festive season holidays and consumer desire to start the year as frugally as possible hits sales. This year has been no different and we have seen a fall of 8% on the last quarter in terms of value of plans and volume of plans.
This steady annual increase in the size of the market shows that consumers are more confident and more aware of equity release as a way of boosting their finances.
Drawdown Market Share Increases:
The proportion of customers choosing to access their equity in smaller tranches has increased over the past quarter. Drawdown mortgages now account for 67% of the market, followed by lump sum mortgages and home reversions.
This increase in popularity of drawdown mortgages over the last quarter, to the highest level since Q3 2008, is likely to be the result of more people choosing to use equity release to supplement a monthly income, rather than pay for one-off expenditure.
Intermediary Sales Remain Steady:
The proportion of equity release plans sold through intermediaries remained level with last quarter at 90%, at a value of £179.5m, and compared with direct sales of £19.6m. This remains at the highest level since SHIP started tracking this data and continues to reflect the importance of intermediaries in the market.
Andrea Rozario, Director General of SHIP said:
“These figures are extremely encouraging and show that the market is continuing to grow steadily, year on year. Furthermore, the increase in the number of customers electing to drawdown their housing wealth in stages reflects the growing awareness for the different uses of housing equity – such as supplementing an existing income.
“This year is a significant and exciting one for SHIP, as we expand our membership to include members from across the equity release industry. This will allow us to provide an even more comprehensive look at equity release sales figures in the future through the expansion of data available from new members.
“These figures show that there is a growing appetite amongst consumers for equity release products, and by bringing together organisations from across the industry we will ensure that we are well placed to meet this demand”.
Darren Dicks, Head of Retirement at Aviva, comments on SHIP’s Q1 2012 figures:
“While we saw the traditional seasonal fall between Q4 2011 and Q1 2012, it is great news that there has been a 10% year on year increase in the value of plans sold. This shows that the market is firmly back on track and bodes well for the remainder of 2012.
“It is also interesting to note the swing towards drawdown mortgages which now account for over two-thirds of all plans sold. In today’s uncertain environment, it appears that consumers feel more comfortable reserving an amount they can call on as and when they need it, rather than taking out a large lump sum.
“Equity release is becoming an increasingly common retirement planning tool and we expect to see the market continue to grow as more and more people rely on their housing equity to meet the cost of their later years.”
Steve Wilkie, managing director, equity release specialist Responsible Equity Release comments:
"In such a tough economic climate, it will come as no surprise that there has been a sharp rise in the number of people turning to the equity in their homes to help themselves and their families pull through. The toxic combination of high debts, high inflation and high unemployment has stretched many people's incomes to breaking point and the money tied up in our houses is providing a degree of relief.
"Five or six years ago, the majority of people releasing equity did so to improve the quality of their retirement, but these days a growing number of equity release plans are being used simply to make ends meet.
"There's no doubt that the dynamic of the sector has changed in recent years. What's also interesting is that a large percentage of the enquiries we now get are through word-of-mouth, which suggests people are more familiar — and comfortable — with equity release.
"Also, equity release has been undergoing something of a metamorphosis, changing from a fairly predictable sector into a dynamic one infused with innovation. This is inevitably attracting people - who may not have considered this route before - to the benefits of equity release."
