OAPs buck equity release trend

17 July 2008 11:38am

The amount of money pensioners unlocked from their homes rose by 14% during the second quarter of the year, bucking the trend in the wider mortgage market, figures show.

Despite falling house prices, retired people collectively released £275.7 million from their properties during the three months to the end of June, up from £242.7 million during the first three months of the year.

Industry body Safe Home Income Plans (Ship) said the jump may have been driven by people bringing forward plans to cash in on their home's value due to fears that property prices would fall further.

It added that pensioners' finances may also be coming under pressure from rising food and fuel prices.

But despite the quarter-on-quarter increase, the value of equity release plans taken out was still down on the record figure for the second quarter of £302.3 million, reached in 2007.

Andrea Rozario, director general of Ship, said: "This success underlines the robust health of the equity release sector despite the impact of the credit crunch that is having such a negative effect on the mainstream mortgage market.

"It also serves to highlight the distinctly different forces that drive the equity release market relative to the mainstream market, including the fundamental pressures of the UK's ageing population, falling levels of pensions contributions and the very high levels of personal wealth held in housing equity."

Equity release enables retired homeowners to access money tied up in their property without having to move.

They can do this either by taking out a lifetime mortgage which is repaid when they die or finally sell their home, or by selling a proportion of their property to a home reversion company.

Ship said lump sum lifetime mortgages remained the most popular type of plan, accounting for 53% of the total, while drawdown mortgages, which enable people to borrow money in stages, accounted for 42%. But only 5% of people unlocking money from their home opted for a home reversion scheme.

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