Fewer retired release homes equity

26 January 2009 12:46pm

The amount of money retired people unlocked from their homes fell to a six-year low during 2008.

Falling house prices and the problems in the wider economy contributed to a 9% drop in the total value of equity release plans taken out during 2008 to just under £1.1 billion - the lowest annual total since 2002, according to industry body Safe Homes Income Plans (Ship).

But the group said some of the drop could be attributed to the increasing popularity of more flexible drawdown plans, which enable people to release the money they need in stages, rather than taking it as a lump sum.

And while the value of plans taken out fell by 9%, the volume dropped by only 4% to 28,224.

The group said it was considering changing the way it reports figures on equity release to try to reflect the more sophisticated products that are now available.

Andrea Rozario, director-general of Ship, said: "A slight decline in business volumes in 2008 was to be expected given the turbulence in the economy over the past 12 months. Overall, we are pleased with how the sector has held up, especially in comparison to mainstream mortgages."

Equity release enables retired homeowners to unlock money from their property without having to sell their home or move.

They can do this either by taking out a lifetime mortgage which is not repaid until they die or sell their home, or by selling a proportion of their property to a home reversion company.

Ship said sales of lifetime mortgages had fallen by 2% during the year, with the amount of money unlocked through these plans dropping by 8%, although within this category the sale of drawdown policies increased.

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