Demand for equity release strengthens in H1

Sales of equity release plans during the first half of the year rose 5.24% while the amount released by homeowners increased by 3%, Key Retirement Solutions has found.

In its equity release market monitor, it said that 10,488 plans were sold in H1, up 5% compared to the same time last year, while the value of lending rose by 3% to £463m compared with £449.1m in the same period of 2010.

It added that customers benefitted from the use of the drawdown facility, which accounted for 75% of sales in H1, compared with 72% in 2010.

Dean Mirfin, group director at Key Retirement Solutions, said: "The really significant fact which the industry has overlooked is that drawdown has changed the market forever.

"If factored into total sales, it would take us back to the 2006 peak levels of lending when single, higher, advance business was more prolific. Total lending inclusive of drawdown facility is £660m for the first six months of this year."

He said this is because the analysis revealed there are undrawn funds of £197m among those who took out a plan in H1 2011.

Mirfin added that the equity release market is firmly established on a growth trend with more providers looking into the sector.

"We saw the return of Stonehaven and More 2 Life earlier this year and its likely that more providers will enter the market."

However, Mirfin added that while building societies have an increased appetite to lend in the sector, the problem of funding still remains its biggest problem.

Simon Chalk, equity release planner for Later Living, added that the market is looking much stronger than last year, but still faces many challenges ahead.

"The number of enquiries into equity release plans has soared substantially. We've experienced more enquiries for the first six months of this year compared to the whole of last year, however, its still very difficult to convert cases.

"More importantly, if the sector is to return to pre-recession levels than we need more providers to enter the sector and boost competition."