Looming interest-only mortgage due dates have driven a surge in sales of lump sum equity release plans, according to Key Retirement’s first quarter figures.
Sales jumped to 40 per cent of the market, up from 30 per cent a year earlier. Key Retirement attributed the rise to customer demand for the maximum cash available, rather than drawdown, to use the lump sum to pay off shortfalls in interest-only mortgages.
Dean Mirfin, technical director at Key Retirement said: “It’s long been predicted that as the first large wave of interest-only mortgages maturities begins, more customers will turn to equity release to plug this gap.”
Equity Release Council chairman Nigel Waterson pointed out their analysis found borrowers aged 55 to 64 have been leaning towards lump sum products, while older borrowers favour drawdown arrangements.
The Market Monitor, which analyses data for ERC members and non-members, showed total property wealth released rising to nearly £415m, up 22 per cent from £341m last year. The average loan amount also rose £66,734 for the first quarter of 2015, to £76,115 in the last three months.
Around 29 per cent of customers used some or all of the money to pay off unsecured borrowing, primarily credit card debt or loans, although 21 per cent used some or all of their money to clear outstanding mortgages.
Sales of equity release plans for the quarter were 5,447, up 7 per cent from 5,110 for the same period of 2015.
Drawdown remains the most popular type of plan, accounting for 60 per cent of all new plans and providing potential further borrowing of £126m, in addition to the £415m in initial advances. This means a a total market for the quarter of £541m, compared to £487m for the same period last year.
TOTAL VALUE OF EQUITY RELEASED ACROSS THE COUNTRY
| Region | Number of plans sold Q1 2016 | Number of plans sold Q1 2015 | Total value released Q1 2016 (£ million) | Total value released Q1 2015 (£ million) |
South East | 1,291 | 1,211 | £114.573 | £97.011 |
London | 657 | 616 | £87.521 | £70.411 |
South West | 654 | 646 | £49.902 | £40.285 |
North West | 518 | 442 | £29.764 | £20.067 |
East Anglia | 376 | 291 | £25.127 | £13.94 |
East Midlands | 390 | 391 | £21.152 | £17.714 |
West Midlands | 379 | 348 | £21.497 | £20.645 |
Scotland | 365 | 355 | £21.298 | £17.68 |
Yorks & H’side | 376 | 421 | £20.363 | £19.903 |
Wales | 250 | 177 | £12.885 | £8.944 |
North | 146 | 224 | £8.252 | £11.65 |
Northern Ireland | 45 | 37 | £2.291 | £2.734 |
UK | 5,447 | 5,110 | £414.631 | £340.991 |
Adviser view:
Steve Wilkie, managing director at Responsible Equity Release, said rising property prices have been a contributory factor, particularly in London, where house prices have hit record levels.
“Products such as interest-only lifetime mortgages, flexible repayment, downsizing protection and inheritance guarantee, are attracting a whole new market to the benefits of equity release,” he added.
peter.walker@ft.com
