Article date: 10 February 2003
Older people are cashing in on the boom in the property marketby borrowing in record numbers against the value of theirhomes.
The market for “equity release” products has morethan tripled in the last three years, say figures releasedtoday.
According to SHIP (Safe Home Income Plans), which represents themajor equity release providers, borrowing rose from £240.1 millionin 1999 to £852 million last year. That’s a rise of 355 percent. Last year alone the market soared 49 per cent.
The surging property market is also affecting Britain’schoice of equity release products. Overwhelmingly consumers favourmortgage schemes in which a fixed sum is secured on a home andrepaid with interest after death or a move into long termresidential care.
Last year, mortgage schemes accounted for £651 million ofbusiness, up from £359 million in 2001. That’s three quartersof the total equity release market.
Sales were down on “reversion” plans. These loansinvolve selling a fixed percentage of the home. Obviously, in aclimate of booming house prices, this is a less attractive optionfor home owners. In 2002 reversions fell back from £213m to£201m.
Norwich Union, which is the largest provider of mortgage- basedequity release products with a 42 per cent market share in 2002 (upfrom 36 per cent in 2001), believes the sharp increase reflects achange 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 peopleare looking at ways to release the value tied up in theirhomes.
“They are more active than ever and they want to fund alively, enjoyable and more financially secure retirement.Increasingly, their children want this for them too. All of whichexplains why equity release is so acceptable now – and sopopular.
“Not surprisingly, given the present climate, it’smortgage schemes they want. We’ve worked hard to provide manyvaried mortgage products so it’s pleasing to see that sectornearly double in the last year.”
Evidence suggests equity release borrowers use the cash theyrelease from their property for all kinds of purposes - to travel,improve their homes, buy new cars, or to invest so they have moremoney to spend day to day.
And the market is still buoyant. The SHIP figures show thesecond half of 2002 saw a 72 per cent increase in business from thefirst half.
Press office contacts:
James Evans - 08703 66 68 78/07790 487105
Ian Beggs - 08703 66 68 71/07790 487 533
Louise Goffee - 08703 66 68 70/07810 057 362
Notes to Editors
- Norwich Union is the UK’s largest insurer. It is aleading provider of life, pensions and investment products and oneof the leading IFA providers. IFAs provide around 75% of thecompany’s long-term savings business.
- Norwich Union has strategic alliances with building societiesand other leading UK brand names including Tesco Personal Financeand The Royal Bank of Scotland Group.
- Norwich Union’s news releases are available on the Avivaplc website at www.aviva.com
- A selection of images are available from the Norwich UnionNewscast site at www.newscast.co.uk