Updates on Equity Release for IFAs
The number of new equity release mortgages has declined by 30% in the past three years with just over 20,000 in 2009.
The main reason is that 10 of the 24 providers have withdrawn from the market in the same period leaving just 14 accepting new business.
|
|
Year |
Volume |
Gross lending |
Number of providers |
Number of products |
|
2007
2008
2009
2010 - Q1 |
29,293
28,224
20,492
4,716 |
£1,210.4m
£1,095.8m
£945.8m
£213.4m |
24
22
23
14 |
63
66
108
72 |
|
The most notable provider to have left is Prudential who in 2008 had a 23% share of the market reducing to 12% in 2009. It cited funding as the main reason for the withdrawal as well as the onset of the credit crunch which ruined plans for securitising its mortgage book. Aviva has been the main beneficiary increasing its market share to 29% (£276m) in 2009.
Renewed optimism
The first quarter of 2010 has seen only a small reduction in new business applications, compared to the last quarter of 2009, but there is cause for optimism given that this lending was achieved with fewer providers. According to data from Safe Home Income Plans (SHIP) 79% of sales were distributed through the intermediary channel.
We believe the ongoing demand for equity release mortgages, driven by an ageing population with inadequate pension provision, will bring new providers into this market in the near future. However, product features such as a ‘no negative equity guarantee’ may be absent.
Sale and rent back
With the lack of providers in the equity release market, sale and rent back, which is seen as the alternative product, could bridge the lending gap for some consumers. On 30 June 2010, new measures will be introduced by the FSA for any provider wishing to continue to offer this scheme. The main changes will focus on greater protection for consumers, ensuring that high-pressure sales techniques are not used and that they have a full understanding of the sale and rent back agreement.
