Equity release increases lending and sales in 2011

In 2011 the equity release market enjoyed the first annual rise in both total lending and plan sales since 2007 according to Key Retirement Solutions.

Total funds released rose 5.4% to £959.6m - the first rise in four years. Plan sales continued to grow with a 1.6% rise to 22,366 in 2011.

If untapped drawdown funds are also added in then total lending rose to more than £1.3bn.

Key Retirement Solutions group director Dean Mirfin says: "The equity release market is firmly established on a growth trend again after several years when the story has been about stagnation at best and decline for some providers."

However, the adviser is concerned that not enough clients are utilising drawdown. The industry average is currently 55% with Key Retirement Solutions recording 74% of sales as drawdown. Customers using drawdown plans benefit from lower borrowing costs as they only draw down what is required.

Mirfin says: "A robust sales and fact finding process has resulted in Key's percentage of new drawdown business for the year being 74%, considerably higher than the market average, and we believe there is still work to be done in the sector to ensure consumers are not taking on single advance equity release when they do not have a requirement for the funds all at once. Drawdown can save consumers many thousands of pounds on the overall cost of borrowing."