Equity release providers report 14% increase in business

Members of Safe Home Income Plans (SHIP), the equity release trade body, have reported that business volumes in the second quarter of this year have increased by 14% over volumes in quarter one.

A total of £275.7m of equity was released by SHIP members in the second quarter, 14% higher than the £242.7m released in the first quarter.

Andrea Rozario, director general of SHIP, said: “This success underlines the robust health of the equity release sector despite the impact of the credit crunch that is having such a negative effect on the mainstream mortgage market.

“It also serves to highlight the distinctly different forces that drive the equity release market relative to the mainstream market, including the fundamental pressures of the UK’s ageing population, falling levels of pensions contributions and the high levels of personal wealth held in housing equity.

“Despite the current fall in property prices, the very big increases of the past mean that typically, by far the biggest asset held by people later in life is equity in their home.”

In terms of distribution, brokers continued to dominate, although the percentage of total equity release business carried out relative to the direct channel fell slightly from 74% in the first quarter of 2008 to 71% in the second quarter.

In terms of product type, lump-sum mortgages accounted for 53% of Q2 loans, drawdown mortgages for 42% and home reversions for 5%. These numbers represent continued growth in the popularity of drawdown equity release arrangements.