Pensioner incomes are being squeezed and rising house prices have boosted confidence, Key Retirement Solutions says.
The growing confidence and increased levels of activity has also been encouraging more funders and lenders to consider the sector. In quarter 2 More2Life became the first lender to re-enter the equity release market launching with a lifetime mortgage offering enhanced deals to people with health conditions, the first new product launch for two years.
The group’s Equity Release Market Monitor for the first six months of 2010 shows up to £454.99 million of housing wealth was released through equity release schemes compared with £372.394 million in the same period of 2009 – a rise of 22%.
The average age of people starting equity release rose to 69 in the six months from 67 in the same period of 2009 demonstrating a need for increased income as retired homeowners struggle on existing pensions.
Total sales of plans climbed 5% to an estimated 10,318 in the six months up from 9,852 in 2009 with drawdown plans – which enable customers to take cash when it is needed rather than in a lump sum – making up 72% of sales compared with 61% last year. The average amount of cash released in the six months was £42,555 compared with £42,586 in the same period of 2009.
Dean Mirfin, group director at Key Retirement Solutions, said: “Housing wealth is an important source of income for pensioners and certain to become even more important as pension income continues to be squeezed. New business growth rates of 22% on 2009 demonstrate that customers are recognising that their housing wealth can be put to good use.
“The strong sales performance is underlined by the fact that the number of firms competing in the market looks to be turning the corner in a positive direction after recent withdrawals and that new plans offering improved terms to people with medical conditions are demonstrating that there is good space in the sector for further innovation.”
The Market Monitor shows the average loan-to-value of equity release plans fell to 19% from 22% reflecting the shift to increased use of drawdown plans.
Single advance Lifetime mortgages made up 25% of sales in 2010 compared with 35% in 2009 while reversions slipped from 4% of total sales last year to 3% in the first six months of 2010.
