Demand for equity release rising: ERC
Equity release has boomed over the first half of 2012, with more households seeking alternative forms of income, according to the Equity Release Council.
Figures for the second quarter this year show that total advances of £224.8m were made over the period, compared to £184.8m in last year’s second quarter - a 22 per cent increase.
The data ERC said this was the highest amount of equity released in a single quarter since the fourth quarter of 2009.
The number of plans sold rose to 4302, up 6 per cent on the first quarter of the year, at 4057 and 16 per cent up on the second quarter of 2011, at 3710.
Responding to the figures, Claire Barker, chairman of the Equity Release Solicitors’ Alliance, said: “These figures are great news for the equity release industry and vindicate the hard work specialists have been putting in.
“It is important that, with the industry growing, the highest standards are maintained as more consumers engage with equity release.”
However, Brian Tabor, financial planner for St Albans-based Care Matters, said: “A lot of firms offering equity release have come up with a new way of calculating and paying out.
“They are now using a multiple of the original loan, sometimes the multiple is two or three times higher.
“Most clients want a small amount of money for their income, such as £10,000 or £12,000 a year but instead of being paid a little income over the course of 10 years, now these providers are paying huge swathes of money in the first couple of years - sometimes putting between £40,000 and £70,000 in the client’s bank account within the space of a year.
“This is seriously eroding the value of any inheritance and, for many elderly people, this is not what they need - they only needed a few thousand pounds.”