Equity release new business reaches record levels
The total value of plans taken out via SHIP members (who represent 90% of the market) and non-SHIP providers in the three months to 31 December 2004 was £385 million, up 3.5% on the previous Quarter (£379 million), which was the previous record. This was also 24% greater than in Quarter 4 2003 (£311 million). The total value of plans taken out in 2004 was £1.324 billion (2003: £1.277 billion). Both are record highs.
Key Retirement Solutions believe that the record figures reflect both the established demand for Equity Release among the “equity rich” over 65s, and the growing confidence in the market since the introduction of mortgage market regulation in October 2004.
Key Retirement Solutions’ UK Equity Release Monitor analysis shows that the highest levels of new business growth (£value) in 2004 as a whole, were in Northern England (143%), Yorkshire and Humberside (88%) and North West England (56%). The West Midlands and Wales also saw double-digit growth. (See regional highlights in KRS UK Equity Release Monitor attached).
By comparison, in the South West, South East, East Midlands and East Anglia, the value of new business was lower in 2004 than in 2003 (-12.1%, -9.7%, -11.3% and –6% respectively), although the South East and South West remain the largest market areas by volume and value overall.
In 2004, in the South East 7072 plans worth £362 million were taken out. This was followed by the South West where 4705 plans worth £236 million were taken out. In the North West 3644 plans worth £149 million were taken out. Scotland recorded the lowest volume and value of new business – just 460 plans worth £14 million were taken out.
Outstanding equity release plans are now valued at £3.9 billion, representing over 92,000 plans.
Quarter Four Trends
In the three months to 31 December 2004, the West Midlands (29%), the North West (28%) and South East (24%) saw the highest levels of growth in number of equity release plans taken out. The East Midlands, London and the North also saw positive growth with the rest of the country recording a drop in numbers.
The North West (26%) and West Midlands (21%) recorded the highest levels of new business growth (£value) compared to the previous Quarter. Both the South East (20%)and East Anglia (18%) also saw higher new business levels (£value) which Key Retirement Solutions believes reflects the stabilising of property prices in these regions.
Across the country, the average age of the equity release customer was 70 years, the same as in Quarter 3, and the average equity released was £47,683 on a property with the average price of £194,925, both slightly lower than in Q3 (£49,115, 197,000).
The value of Intermediary introduced business increased by 6.4% over Q3 2004 (£249m compared to £234m) while Direct business fell slightly by 1.5% (£136m compared to £138m). The trend to Intermediary introduced business reflects the growth in the number entering the market and the general move by providers to encourage customers to seek independent advice.
Reversion policy sales remained low, but rose slightly in Quarter 4 compared to Quarter 3, accounting for 3.3% of sales (Q3: 2.5%). It is likely that Reversions will become more popular this year, as awareness grows of the tough new SHIP code to protect reversion customers.
Dean Mirfin, Business Development Director of Key Retirement Solutions comments, “These record figures confound the fact that Quarter 4 is traditionally a quieter time of the year for Equity Release, and provide further confirmation of the strength of demand for this product.
“2004 has seen particularly strong growth in the value of equity release in Northern regions of the UK, as the more recent property price inflation in these areas has stimulated the market. This pattern continued in Quarter 4, but we also witnessed a return to positive new business growth in some Southern regions, reflecting the stabilising of property prices here.
“We believe that business growth in 2005 will be strong as new mainstream lenders enter the market post Mortgage Regulation and an increasing number of people seek to supplement their retirement income.”