Equity release market expansion continued for the second year with a rise in the average amount released last year boosted by increased sales of plans, according to analysis from Key Retirement Solutions.
The average customer taking out an equity release plan in 2012 released £52,268 – nearly 7% up on 2011’s £49,000 – as the continuing squeeze on retirement income highlighted the benefits of property wealth, the group’s Equity Release Market Monitor 2012 shows.
Total funds released across the market climbed 15% to £961.41 million from £832 million taking the market nearly back to its 2009 level when more than £1 billion was lent. However once untapped drawdown funds of £415.6 million – which have yet to be released – are added in the total released was nearer £1.4 billion.
Plan sales climbed 6.3% during the year to 19,675 from 18,510 with drawdown plans enabling customers to benefit from lower borrowing costs as they can take funds when required rather than in a lump sum
Around 74% of all sales were drawdown confirming the focus on innovation across the market compared with 25% from lifetime mortgages and just 1% from reversion plans.
Home and garden improvements remained the most popular use of funds – 57% of people used some or all of their cash for those purposes.
Dean Mirfin, group director at Key Retirement Solutions, said: “Equity release is firmly established on the growth path driven by innovation and a focus on expert advice.
“The increase in the average amount being released is significant as it demonstrates increasing confidence in the market as a solution to the continuing squeeze on pensioner income from low savings rates and falling annuity rates.
“Innovation in the market is continuing with the launch of plans designed to help clients tackle the issue of funding interest-only mortgages into retirement. Plans are now available enabling clients to pay interest and release funds which is a direct response to the interest-only ticking time bomb problem.”
