Older people are cashing in on the boom in the property market by borrowing in record numbers against the value of their homes.
Older people are cashing in on the boom in the property market by borrowing in record numbers against the value of their homes.
The market for “equity release” products has more than tripled in the last three years, say figures released today.
According to SHIP (Safe Home Income Plans), which represents the major equity release providers, borrowing rose from Ł240.1 million in 1999 to Ł852 million last year. That’s a rise of 355 per cent. Last year alone the market soared 49 per cent.
The surging property market is also affecting Britain’s choice of equity release products. Overwhelmingly consumers favour mortgage schemes in which a fixed sum is secured on a home and repaid with interest after death or a move into long term residential care.
Last year, mortgage schemes accounted for Ł651 million of business, up from Ł359 million in 2001. That’s three quarters of the total equity release market.
Sales were down on “reversion” plans. These loans involve selling a fixed percentage of the home. Obviously, in a climate of booming house prices, this is a less attractive option for home owners. In 2002 reversions fell back from Ł213m to Ł201m.
Norwich Union, which is the largest provider of mortgage- based equity release products with a 42 per cent market share in 2002 (up from 36 per cent in 2001), believes the sharp increase reflects a change in the attitudes of Britain’s older people.
Paul Stokes, Head of Marketing for Norwich Union Equity Release, says: “Like all home owners in a booming market, older people are looking at ways to release the value tied up in their homes.
“They are more active than ever and they want to fund a lively, enjoyable and more financially secure retirement. Increasingly, their children want this for them too. All of which explains why equity release is so acceptable now – and so popular.
“Not surprisingly, given the present climate, it’s mortgage schemes they want. We’ve worked hard to provide many varied mortgage products so it’s pleasing to see that sector nearly double in the last year.”
Evidence suggests equity release borrowers use the cash they release from their property for all kinds of purposes - to travel, improve their homes, buy new cars, or to invest so they have more money to spend day to day.
And the market is still buoyant. The SHIP figures show the second half of 2002 saw a 72 per cent increase in business from the first half.
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Notes to Editors
- Norwich Union is the UK’s largest insurer. It is a leading provider of life, pensions and investment products and one of the leading IFA providers. IFAs provide around 75% of the company’s long-term savings business.
- Norwich Union has strategic alliances with building societies and other leading UK brand names including Tesco Personal Finance and The Royal Bank of Scotland Group.
- Norwich Union’s news releases are available on the Aviva plc website at www.aviva.com
- A selection of images are available from the Norwich Union Newscast site at www.newscast.co.uk