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Lump Sum Lifetime Mortgage Surge Boosts Equity Release

08 May 2013

  • One in three customers took out lump sum lifetime mortgages in first quarter, KRS Equity Release Market Monitor shows

  • Customers increasingly use cash to clear existing mortgages and treat family and friends

Download the full report at: market-monitor-q1-2013

 

Increased sales of equity release lifetime mortgage plans have increased the average amount released by a record 27% in the first three months of the year, analysis from leading independent equity release adviser Key Retirement Solutions shows.

 

Customers taking out an equity release plan in the first quarter of 2013 released £56,710 - 27% up on 2012's £44,519 - demonstrating increased confidence in the use of property wealth, the group's Equity Release Market Monitor 2012 shows.

 

Around 21% of customers used some or all of the cash to clear mortgage debts showing increasing awareness of equity release as a solution to the interest-only crisis while 28% took money out to help family and friends.

 

Total funds released across the market climbed 21% to £263.1 million from £217.15 million and once untapped drawdown funds of nearly £84 million - which have yet to be released - are added in the total released was nearer £350 million.

 

Plan sales climbed 1.3% during the three months to 4,567 from 4,508 - but there was a switch in the mix of plans sold. Around 34% of all plans sold were lifetime mortgages compared with nearly 22% in the same period last year while drawdown took 66% of sales compared with 77% in the first three months of 2012.

 

Home and garden improvements remained the most popular use of funds - 58% of people used some or all of their cash for those purposes. But the numbers using cash to clear mortgages rose to 21% from 17% and the proportion helping family and friends climbed to 28% from 23%.

 

Dean Mirfin, Group Director at Key (www.keyadvice.co.uk), said "The increased use of lump sum lifetime mortgages is significant as it shows the growing confidence in using property wealth and success for ongoing innovation, higher advances are increasingly needed to help clear outstanding mortgages.

 

"That is reflected in the increase in the average amount being released in response to the continuing squeeze on pensioner income from low savings rates and falling annuity rates. The average amount released for the whole of 2012 was £52,268 which in turn was 7% up on 2011.

 

"Equity release has a major role to play in tackling the issue of funding interest-only mortgages into retirement. The launch of plans enabling clients to continue to pay interest and at any time switch to roll up interest has boosted use of lifetime mortgage plans and there is more innovation to come."

 

Across the country the total value released rose in all 12 regions with Scotland seeing a 60% increase and Northern Ireland recording a 59% rise just ahead of the West Midlands which saw total value released climb 56%.

 

In contrast five out of 12 regions saw growth in the total number of plans sold with Scotland recording a 50% increase and the West Midlands a 29% rise. The biggest fall in number of plans sold was 23% in Northern Ireland. 



 
 

Region

 

Total plans sold  Q1 2013

 

Total plans sold Q1 2012

 

Total value released  Q1 2013 (£million)

 

Total value released Q1 2012 (£million)

 

South East

 

939

 

1,088

 

£63.1

 

£57.79

 

London

 

375

 

402

 

£40.28

 

£30.75

 

South West

 

529

 

540

 

£31.17

 

£27.42

 

North West

 

513

 

447

 

£23.55

 

£18.86

 

West Midlands

 

433

 

335

 

£22.24

 

£14.28

 

East Midlands

 

410

 

458

 

£18.99

 

£17.64

 

Scotland

 

387

 

257

 

£16.18

 

£10.08

 

Yorks & H'side

 

341

 

350

 

£15.71

 

£14.47

 

East Anglia

 

211

 

224

 

£11.95

 

£9.165

 

Wales

 

207

 

186

 

£10.68

 

£8.39

 

North

 

199

 

190

 

£8.2

 

£7.62

 

Northern Ireland

 

23

 

30

 

£1.02

 

£0.644

 

UK

 

4,567

 

4,508

 

£263.09

 

£217.15

 

 Anyone looking to release equity from their home can get Key ' independent guide to equity release by calling 0800 531 6010 or visiting www.keyadvice.co.uk/equity-release/request-a-free-guide.

 

 Notes to Editors

 

* Key Retirement Solutions market data