Housing market growth is driving confidence in using property wealth to boost retirement income as total housing wealth of nearly £300 million was released in the three months to October, according to analysis from Key Retirement Solutions (KRS).
Customers taking out an equity release plan in the third quarter of 2013 released an average £57,286 – 10% up on the same three months last year – with the property market growth enabling homeowners to access their wealth, the group’s Equity Release Market Monitor for the three months to September 30th shows.
Analysis shows £808.19 million in property wealth has been released so far this year – 15% up on the £702.8 million at the same stage of 2012 – putting the equity release market on course for a record year beating the £1 billion-plus released in 2009.
The strong growth is being driven by increased awareness of equity release plans as a solution for retirement income planning issues, KRS said.
Around 23% of customers used some or all of the cash to clear mortgage debts underlining how equity release is growing as a solution for the interest-only crisis.
However customers are also using the funds released to improve lifestyles in retirement – 59% of customers in the three months used some or all of the cash to pay for home or garden improvements.
Total funds released across the market in the three months climbed 17% to £299.779 million from £256.595 million while plan sales grew by 5% to 5,548 from 5,260.
The change in use of funds was reflected in the increasing use of single advance lifetime mortgages which are seen as a solution for interest-only customers facing looming capital repayments. In the third quarter single advance lifetime mortgages – including ones offering enhanced loan-to-values for customers with lifestyle or health issues – made up 31% of sales compared with 65% for drawdown including enhanced drawdown.
Dean Mirfin, group director at Key Retirement Solutions, said: “The equity release market was already growing strongly before the housing market revival driven by increased innovation and adviser expertise.
“The property market growth is helping customers realise that housing wealth can play a major role in retirement planning both as a solution for problems such as interest-only and as a source of funds when other retirement income sources are under pressure.”
“The market is on course for a record year with growth built on strong foundations due to its focus on advice and delivering solutions which suit changing lifestyles and reflect customer needs.”
Across the country eight out of 12 regions saw increases in the value released with Northern Ireland virtually doubling while Scotland saw a 68% rise followed by London with a 51% rise. The South East, West Midlands, East Midlands and Yorkshire & Humberside all recorded falls but the South East still saw the most released at £70.86 million.
The biggest rises in the the total number of plans sold was in Northern Ireland where sales more than doubled while Scotland saw a 53% rise. The South East saw the most plans sold at 1,229 virtually unchanged on the three months to September 30th last year. Yorkshire & Humberside recorded a 13% drop while the East Midlands saw an 11% drop in plan sales.
