Total Advances and Customers Increase:
SHIP members made new advances of £206.2m in Q3 2011, up 12% on the previous quarter (£184.9m), and the highest level of lending seen since Q1 2010 (£213.4m).
The number of equity release customers also grew by over 10% from 3,710 (Q2) to 4,148 (Q3).
This growth is excellent news for the equity release industry, and shows that consumers are becoming increasingly aware of the benefits of accessing the money tied up in their home, to help them have a more comfortable retirement.
This increased awareness among consumers continues to be led by the adviser market, with Intermediaries accounting for 88% (£181m) of new business, with 12% (£25m) of customers buying equity release direct from a provider.
The share of equity release business coming through intermediaries has remained stable since the last quarter.
Product Types Remain Steady:
The flexibility of drawdown lifetime mortgages remained the most popular in Q3, as it continued to account for the majority of market sales 61% (£126m).
This is followed by lump sum lifetime mortgages at 36% (£75m), with home reversion schemes accounting for 2% (£5m) of all sales in Q3.
The average amount released on an equity release product remained stable in Q3 at £49,703 (Q2 average £49,830).
However, this figure has risen 6% over the last year from £46,754 in Q3 2010, a period where the average property would not have increased in value at the same rate.
With a new breed of impaired life equity release products entering the market, this rise could be attributed to people in ill health being able to raise a greater amount of equity from their home, or that people are borrowing more to help cope with the rising cost of living.
Andrea Rozario, Director General of SHIP said:
“This has been an excellent quarter for the equity release market. Considering the wealth locked up in a property as part of general financial or retirement planning is essential, as it will continue to be the greatest asset most people have as they approach retirement.
"We feel that breaking the psychologically important £200 million barrier for new advances in Q3 is fantastic news for an industry that is recognized to have a huge latent demand.”
“While it is unlikely that we will see an immediate return to business levels recorded prior to the recession, we are confident that the market has started to turn a corner and we will return to more typical trading conditions.
"The UK population is ageing and with insufficient pension provision and the prospect of meeting significant care costs, we expect the demand for equity release products to increase significantly over the next few years.”
Richard Eagling, Editor of Investment Life and Pensions Moneyfacts, commented:
“The latest equity release figures from SHIP revealing a rise in customer numbers and a considerable increase in lending suggest that the sector is moving in the right direction after what has been a challenging couple of years.
“The increase in demand for equity release comes at a time when greater numbers of elderly homeowners are struggling to cope with the rising cost of living. Given the extent of the pensions crisis and the fact that many retirees are finding it difficult to fund their retirement, accessing the money tied up in their home is the only sensible choice left.
"With the baby boomer generation now hitting retirement we are likely to see even more individuals embrace equity release as an alternative means of providing income in retirement.
“The equity release sector has long threatened to break out as the next big thing, but it has never realised its full potential. Unfortunately, the financial crisis and ensuing credit crunch halted the march of equity release before it really got started.
"Increasing longevity, the boom in retiree numbers and the realisation that many pensions are underperforming may just provide the equity release market with the impetus that has been lacking.”
