Equity release lending plummets

Equity release lending plummets

Despite high hopes for the equity release market during the fallout from the credit crisis, the first quarter of 2009 has produced disappointing results.

The Key Retirement Solutions (KRS) Equity Release Market Monitor shows a decline in take-up compared to a year ago, with the number of plans sold down 7% during the first three months of the year.

Actual equity release lending for the first quarter fell almost 24% year-on-year, according to the Monitor.

The downturn is the steepest since KRS’s records began in 1998 with the total value of loans at £183 million, compared with £240 million a year earlier.

The average loan amount fell by an annual 15.33% to £44,948.

KRS director, Dean Mirfin, comments: “The dramatic fall in lending figures is impacted most by the fall in property values. The average property value for someone taking out equity release has fallen by over £36,000.”

With house prices an estimated 16% below their peak of summer 2007, some homeowners considering equity release may well be holding back and Mr Mirfin believes that despite the first-quarter result, “the demand to release equity is still strongly evident”.

In January, Safe Home Income Plans (SHIP), the body that represents 90% of the UK’s equity release providers, predicted that falling interest rates mean more homeowners turned to equity release to fund post-retirement living costs.

SHIP is therefore predicting that the market will expand by £200 million, to £1.4 billion, by the end of 2009.

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