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Equity Release lending remains buoyant compared to 60% fall in gross mortgage lending since 2008
As large providers leave the market, the importance of the IFA has never been more apparent
The equity release market has remained buoyant relative to the general mortgage market since the downturn from the credit crunch, according to Hodge Lifetime, the UK’s longest established equity release provider. While latest figures show that the value of quarterly gross mortgage lending has seen a decline of 60% since Q1 2008*, the last quarter before the downturn, comparable equity release figures show a decline of just 12%** as IFAs demonstrate their importance in propping up the market.
Power of advice
The extensive demand for IFA advice within equity release has been made more than apparent during the past six months, with the withdrawal of large providers and direct sales forces having limited impact on the market. Indeed the number of customers discovering equity release though an adviser increased to 35% at the end of Q1 2010 from 21% in Q1 2008, according to Hodge Lifetime’s own extensive customer research. Equally, 79% of all IFAs surveyed by Hodge Lifetime, claim that their confidence in advising on equity release has remained unaffected since the announcement of provider withdrawals from the market.
Client demand
Aside from adviser presence and importance in the market, further factors bolstering the resilience of equity release also come from client demand and changing economic circumstances.
Initially, a fall in average house prices by 13.6% since 2008*** has made many older homeowners reluctant to downsize. In this scenario, retirees have taken the option to release equity from their property to maintain their standard of living, while ensuring they can stay in their own home.
The use of equity release for debt consolidation has also increased significantly, rising from 11% to 35% during 2009 (source: Key Retirement Solutions) and with increasingly prohibitive housing deposits and study fees, the growth of the ‘Bank of Mum and Dad’ or even the ‘Bank of Grandma and Grandpa’ is also not insignificant. Offering financial help to younger relatives has remained steadily significant as a reported use of equity release by Hodge Lifetime customers over the past year.
Jon King, Managing Director of Hodge Lifetime says,
“While the equity release market has witnessed a slight decline since 2008, it has been nowhere near as significant as the fall in gross mortgage lending during the same period. The importance of seeking independent financial advice for these products has really come to the fore and it is the strong presence of IFAs who now operate in this arena that should be praised for ensuring the resilience of the market over the past years and into the future.”
- * Council of Mortgage Lenders, Gross Mortgage Lending Figures, Q1 2008-Q1 2010 (released 17th May 2010)
- ** SHIP Quarterly Statistics, Q1 2008-Q1 2010
- *** Halifax House Price Index – Historical House Price Data (Seasonally Adjusted), Q1 2008-Q1 2010
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