The contributing factors to the Equity Release boom

Published: 02/12/2011

The equity release market is at its highest rate of sales and lending figures in nearly two years, according to Safe Home Income Plans (SHIP).

Q3 figures have shown a 12 per cent year-on-year increase¹ and a survey of 4521 UK adults conducted by Equity Release Solicitor’s Alliance (ERSA), shows a growing appetite for the product with 38 per cent of those questioned considering using their home as a retirement asset².

For a market which has received a barrage of abuse, these figures are a satisfying retort to its sceptics. But what are the reasons behind this booming bout of business?

Poor Pensions

As Wednesday’s nationwide strikes proved, there is a lot of anger and stress about pension provisions. Whether you are in the public or the private sector, pensions are taking quite a battering. That is if you have one at all. As cost of living continues to rise, more and more people are financially unable to pay into a pension. Research by Prudential revealed 40 per cent of all couples have taken no steps in financially preparing for retirement³.

Debt and Depreciating Savings

Unemployment is currently at a 17-year high. Inflation rate has recently been at its highest rate in three years. As a result, savings are bearing the brunt and, where savings aren’t available debt is raising its ugly head. Every working day the Citizens Advice Bureau (CAB) deals with over 9000 new debt problems and every day over £1.1bn is spent on plastic cards4. We are now a nation living off credit and retirement will be the time our lax ways come back to bite us.

Children in Need

The plight of the first time buyer has been well documented. With huge deposits needed to secure a foot on the ladder, the younger generations have little other option than to turn to the bank of mum and dad, grandma and granddad.

All three of these problems have largely contributed to the increased activity in the equity release market, and with seemingly no solutions on the horizon, the boom looks set to continue into the New Year and beyond.

¹Mortgage Solutions (Oct 2011)
²IFA Online (Nov 2011)
³Prudential (Nov 2011)
4Which (Jun 2011)

Content correct at time of publication