Drawdown Effect Drives Equity Release Growth
13 April 2011
£219 million released in first quarter as plan sales rise, KRS Equity Release Market Monitor shows
You can download the full KRS Market Monitor by visiting: market-monitor-q1-2011
More than £219 million of housing wealth was released in the first quarter as the drawdown effect continued to boost equity release plan sales, analysis from leading independent equity release adviser Key Retirement Solutions says.
Sales of plans rose 3.7% in the first three months of 2011 to 5,812 compared with the same period of 2010 confirming the recovery in the market after three years of decline.
Key Retirement Solutions Equity Release Market Monitor shows the total value of equity release rose from £216.9 million in the first quarter of 2010 to £219.85 million in the first three months of 2011.
The growing use of drawdown, which accounted for three-quarters of all sales, was the main driver in market recovery with a further boost from the use of enhanced equity release aimed at customers with medical or lifestyle issues.
More 2 Life, which pioneered enhanced equity release when it became the first new lender in the market for three years in 2010, has firmly established itself as a major provider having gradually built its market share to over 10% in quarter 1.
But it is the ongoing rise of drawdown which is driving the revival as demonstrated by the fall in the average amount released by customers to £37,089 in the first three months of 2011 compared with £43,090 in the same period of 2010.
Drawdown - which accounted for 75% of sales in the first quarter compared with 68% in 2010 - benefits customers who cut borrowing costs as they can draw funds when required rather than in one lump sum.
Dean Mirfin, Group Director at Key (www.keyadvice.co.uk), said: "The market recovery is on course after three years of decline with enhanced equity release making an important contribution.
"That clearly demonstrates the need for innovation and flexibility and shows that customers are happy to buy when the industry responds with products that suit their needs.
"The signs are positive for 2011 with new lenders poised to enter the market pointing to more competition and further potential growth.
"The latest Market Monitor now features increased analysis of the equity release sector and now includes a quarterly spot-light on a particular region. This quarter we look more closely at the uses of equity release for those in the South East. The report also now scrutinises more closely a particular use of equity release and this quarter we look at gifting.
"The Market Report now provides by far the most detailed and comprehensive analysis of the sector."
Across the country 7 out of 12 regions saw growth in the total number of plans sold with the South East seeing the strongest growth - total value released was 16% higher in the three months.
| Region | Total plans sold Q1 2010 | Total plans sold Q1 2011 | Total value released Q1 2010 (£million) | Total value released Q1 2011 (£million) |
| South East | 1,126 | 1,268 | £46.06 | £53.42 |
| London | 542 | 463 | £30.3 | £21.73 |
| South West | 768 | 842 | £31.51 | £32.79 |
| North West | 711 | 605 | £25.43 | £21.68 |
| East Anglia | 295 | 311 | £10.34 | £11.97 |
| East Midlands | 358 | 411 | £11.07 | £12.64 |
| West Midlands | 400 | 516 | £12.09 | £17.57 |
| Scotland | 263 | 353 | £9.11 | £12.50 |
| Yorks/Humbs | 621 | 553 | £21.95 | £17.42 |
| Wales | 216 | 295 | £7.57 | £10.01 |
| North | 263 | 158 | £8.65 | £6.82 |
| Northern Ireland | 37 | 37 | £2.79 | £1.25 |
| UK | 5,600 | 5,812 | £216.9 | £219.85 |
Single advance Lifetime mortgages made up 23% of sales in the first quarter with 7% on enhanced terms compared with 28% in 2010 while reversions dropped from 4% to around 2% of total sales.
The full Market Monitor can be downloaded at Keys’ website market-monitor-q1-2011
Anyone looking to release equity from their home can get Keys’ independent guide to equity release by calling 0800 531 6010 or visiting www.keyadvice.co.uk/equity-release/request-a-free-guide.
Notes to Editors
* Key market data