Equity release providers confident of growth

Equity release providers confident of growth

As interest rates fall, more homeowners could turn to equity release to fund post-retirement living costs.

This is the prediction of Safe Home Income Plans (SHIP), the body that represents 90% of the UK’s equity release providers.

According to SHIP, nine out of 10 equity release firms expect new business volumes to increase during 2009, expanding the market by £200 million in total, to £1.4 billion, by the end of the year.

Over two thirds of SHIP members expect growth to continue into 2010, when the total value of UK equity release business could hit £1.7 billion.

Falling interest rates on savings accounts are likely to be a key driver.

Earlier this week, financial data provider Moneyfacts.co.uk reported that the average savings rate on a no notice account containing £5,000 now stands at just 1.48% and with a further cut in the base rate expected this week, rates of less than one per cent could become the norm.

At the same time, interest rates on equity release plans should fall, making this method of raising cash more attractive.

“Drawdown” equity release plans in particular could increase in popularity.

These plans are more flexible than the “lifetime mortgage” variety, as homeowners decide on the maximum amount of equity they want to release and the cash is paid across in stages, when needed.

House price are also expected to decline during 2009 and SHIP’s director general, Andrea Rozario, expects this year to be unpredictable.

However, she is reassuring about the prospects for the equity release market in the longer-term and says that the role of SHIP in increasing confidence and highlighting the benefits of equity release will prove more important than ever.

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