Full-year figures from SHIP showed reversion business rose from £40.5 million in 2004 to £54.6 million in 2005. The UK body also saw the emergence in the last six months of 2005 of drawdown mortgages as a significant source of income for brokers.
This growth in drawdown mortgages, according to SHIP, comes at the expense of lifetime mortgages, which saw business fall from £1,151.8 million in 2004 to £1,048.9 million in 2005.
Jon King, chairman of SHIP, said: “2005 has seen a change in customer choice. After eight years the tables have turned and while lifetime mortgage business has softened, the home reversion business is going from strength to strength. The birth of flexible drawdown plans is also a significant evolution in the equity release industry.”
However Roger Hillier, product manager at Mortgage Express, said the growth in drawdown business wasn’t as great as he’d hoped.
“While drawdown is growing in the industry, I would have expected higher growth. There are now plenty of lenders in the drawdown market so I should expect the SHIP quarter one figures to show that potential growth coming through,” he said.
Alec Ruthven, director at A M Ruthven & Associates Ltd, commented: “Equity release is becoming more popular as people rely more on their homes for retirement and drawdown will be popular as it’s common sense to pay interest on a small amount, rather than a lump sum. Also, the FSA is worried about people getting into financial difficulty by investing large lump sums from equity release into investments that don’t cover all the interest payments and provide an income to live off. Overall, drawdown mortgages carry a much lower risk for people.”
