VALUE OF EQUITY RELEASED INCREASED BY ALMOST A1/4 IN 12 MONTHS
25 July 2012
The Equity Release Council (The Council) today announces provider market figures for the second quarter of 2012 which show significant growth in both volumes and value.
Advances increase by 22% in the Last Year:
In Q2 2012, total advances of £224.8m were recorded which is 22% up on Q2 2011 (£184.8m) and 13% up on Q1 2012 (£199.0m). This is also the highest amount of equity released in a single quarter since Q4 2009 (£231.7m) – which bodes well for the recovery of the industry post-credit crunch. The number of plans sold grew to 4,302 which is 6% up on Q1 2012 (4,057) and 16% up on Q2 2011 (3,710).
Drawdown Market Share Grows:
The proportion of customers who choose drawdown plans has continued to increase and they now account for 68% (Q2 2012) of the value of the market (Q1 2012 – 67%). Lump sum mortgages count for 32% (Q2 2012) of the market and home reversions account for 1% (Q2 2012).
This is a significant increase in the number of drawdown plans in just three years (48% – Q2 2009) and highlights how people’s use of equity release is gradually evolving. While at the height of the property boom, consumers chose to take out large lump sums, post-credit crunch, they are increasingly cautious.
Indeed, it appears that people are choosing to take smaller tranches of funds over a longer period – possibly to augment their income or pay for one off expenses – rather than taking out a large lump sum.
Distribution Strategy Remains Steady:
While the equity release market grew, the proportion of direct (10% or £23.1m) vs. intermediary (90% or £201.7m) business remained steady for the third consecutive quarter.
Andrea Rozario, Director General of The Equity Release Council said:
“This quarter has been the most successful period for the equity release market in two and a half years. This clearly shows that there is an appetite for these products and that as life returns to the UK mortgage market, the equity release market is also returning to growth.
“Obviously, we are not out of the woods yet and much work still needs to be done to improve consumer understanding of these products. However, this quarter’s figures indicate that going forward, more and more consumers are going to be using their equity to improve their standard of living and pay for costs in retirement.
“Indeed, we’ve seen the market start to evolve and more people are choosing drawdown products rather than lump sum plans as they choose to release equity strategically to pay for specific expenses. 2012 has already been a big year for the Equity Release Council as we rebranded and expanded our membership in June, and these figures put us on track to celebrate a very successful year-end.”