West Midlands sees 84 per cent growth in value of equity release business in Q3.
31% Growth in Value of Equity Release Business Nationwide
Equity Release market on target for over £1 billion of equity to be released by the end 2004
The total value of plans taken out both via SHIP (Safe Home Income Plans) members and non SHIP providers was £379.3m, a new high, and a substantial 31% increase on the second quarter of 2004 (£289 million).
Against a background of falling general mortgage business, Key Retirement Solutions believe that these exceptional figures reflect the growing strength of demand for Equity Release. New levels of confidence as regulation of the mortgage market comes into effect, and the increasing number of over 65s who are seeking to supplement their retirement income and take advantage of property price growth, are the main catalysts.
Key Retirement Solutions’ UK Equity Release Monitor analysis shows that the West Midlands led the surge, with an 84% increase in the value of Equity Release business in the three-month period. All other regions apart from London also experienced double-digit growth. Three other regions also saw business growth in excess of 50% - East Midlands 53.98%, the North East 53.51%, and Yorkshire and Humberside 51.29%. The South West and Wales saw growth in excess of 40% - South West 47.35% and Wales 42.95%. Counter to the national trend, in London, the value of Equity Release plans fell by 13.27%, reflecting a levelling out of demand, which has historically been exceptionally strong. (See regional highlights in KRS UK Equity Release Monitor attached).
The greatest volume of Equity Release business was in the South East where 1691 plans worth £92.3 million were taken out. This was followed by the South West where 1463 plans worth £74 million were taken out.The growth in the three-month period brings the value of equity release plans sold in 2004 to £938.3 million, which puts the industry on course to easily exceed £1 billion (Key Retirement Solution’s forecast £1.15 billion) by year-end. The rate of growth in this Quarter puts the annualised growth rate for new Equity Release at over £1.3 billion.
Across the country, the average age of the equity release customer was 70 years, 1 year younger than in Quarter 2, and the average equity released was £49,115 on a property with the average price of £197,000, higher than in Q2 (£44,675, £191,882).The value of Intermediary introduced business increased by 37% over Q2 2004 (£239m compared to £174m) while Direct business rose by 22% (£149m compared to £115m). The trend to Intermediary introduced business reflects cut backs in some direct sales forces (GE Life and AMP) earlier in 2004 as well as the general move by providers to encouraging customers to seek advice from independent brokers prior to purchasing a plan.
Reversion policy sales have reduced to minimal levels but they received a boost at the end of Q3 2004 when the equity release industry body, SHIP (Safe Home Income Plans) announced a tough new code to protect reversion customers. Any evidence of this in figures for Q4 2004 is likely to be masked by the concern cause by speculation as to the tax liability faced by reversion policyholders under Schedule 15 of the Finance Act 2004.
Colin Taylor, Managing Director of Key Retirement Solutions comments, “The equity release market is cyclical with quarter three traditionally providing the best growth as people seek to organise their finances prior to the festive period. However, I do not believe that the 31% growth we have seen over this period can be solely attributed to this.
“Releasing equity to fund retirement is becoming an increasingly acceptable option for many people. We believe that equity release business will continue to rise to the end of 2004, and forecast that well over £1 billion of plans will be arranged in total this year.
“The third quarter saw the growth in the value of equity release, heralded in quarter two by developments in the North, expanding across the UK with the Midlands recording the highest increases. However, the London market slowed down, reflecting a levelling out of demand, which has historically been exceptionally strong.
“We believe that business growth in 2005 will be vigorous as new mainstream lenders enter the market post Mortgage Regulation and an increasing number of people seek to supplement their retirement income.”
