Equity release advisers are forecasting a rise in demand for lump sum equity release plans despite the domination of drawdown, research from national specialist Bower Retirement Services shows.
Its study shows nearlyhalf (49%) of advisers have seen a rise in sales of lump sum plans against drawdown which enables customers to minimise interest charges by taking money as and when they need it.
Part of the reason for the growth in demand for lump sum plans is a need to find cash to fund deposits for children trying to buy their first home – Bower’s quarterly Adviser Tracker Research shows one in 10 customers releases property wealth to help children buy homes.
The launch of the first sub-5% equity release loan from Legal & General – which is available for homes worth more than £533,000 with minimum loans of £200,000 – is likely to provide a further boost for lump sum sales, Bower says.
Andrea Rozario (pictured), chief corporate officer at Bower Retirement Services, said: “Drawdown continues to dominate the market with the latest market data recording record highs for sales of drawdown and around 70% of all plans now going to drawdown.
“That highlights how innovation has helped to change the market but there clearly still is strong and growing demand for lump sum plans and that will only grow as lower rates are launched.
“Advisers are seeing increases in lump sum sales partly driven by a desire to help children out with house deposits but also from a wider switch in the market to retirement lending rather than property wealth being used to boost retirement income.”
Advisers surveyed say around one in five (19%) customers they see have a good understanding of equity release before the first meeting underlining how important specialist independent advice is.
And the research shows advisers say they recommend around one in 10 customers planning to take out equity release do not go ahead with their plans.
