Equity release mortgages more popular

Equity release mortgage which are also referred to as lifetime mortgages are proving every more popular amongst the retired generations. Safe Home Income Plans, the trade body to which most equity release lenders belong, has reported an increase in business volume amongst its members of 14% in the second quarter of 2008. These figures follow hot on the heels of similar statistics released by Key Retirement Solutions earlier this month.

Andrea Rozario, director general of SHIP, says: “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."

The figures show that 53% of loans taken out were for lump sums, whilst 42% were for loans allowing funds to be withdrawn in stages, with 71% of all loans being arranged via intermediaries. These figures are interesting in themselves as they suggest those applying direct to lenders may not be getting the most suitable product for their circumstances. Jerry Figueroa-Lee, Operations Director at The Mortgage Warehouse said: "In the vast majority of equity release mortgages we advise on, the most suitable loan for the client is either a drawdown product or a scheme offering an initial lump sum followed by a drawdown facility. It is vitally important to get this aspect of the loan right, as withdrawing equity before it is needed means that interest will be eating away at the remaining equity unnecessarily."

He went on to explain that despite all equity release advisers having to hold qualifications, brokers had not yet fully succeeded in building an atmosphere of trust between themselves and a significant minority of those seeking a loan. This is often exacerbated by unease at dealing with a lender whose name is not recognised, and results in many applicants wrongly choosing a lump sum product direct from a household name.

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