Equity Release - UK - May 2009

Abstract

About this report

There have been many false dawns for the equity release industry, with many predictions that ' now is the time for the market to take off' . Given an ageing population and ever-rising house prices and the over-55s accounting for a growing percentage of household wealth in the UK, such views were understandable. So far, this take-off phase of market development has failed to materialise and the credit crunch seems hardly an auspicious moment for a finance market to spring into the future.

And yet, despite falling sales of equity release plans in 2008 (and a further decline likely in 2009), the equity release market is showing a resilience that the wider mortgage market can only dream of. The fact is that the foundations for the take-off of the market are now firmly in place, especially now that the market is fully regulated and tighter regulation is planned for the sale-and-rent-back market. There is also evidence that equity release is being boosted in the recession by many over-55s using it to generate income now that the returns on their savings and investments have been hit by low interest rates.

Drawing on a comprehensive range of information sources, this report considers all these issues and additionally offers an investigation into the internal and broader macroeconomic factors impacting on the market, including changing social and demographic trends, an overview of the market' s competitive context, its strengths and weaknesses, insights and opportunities and the results of Mintel' s independently commissioned consumer research. This research offers insight into the leading characteristics, attitudes and behaviours of homeowners and (actual and potential) equity release customers.

Key issues

• The credit crunch has caused a steep recession in the UK, leading to a sharp decline in house prices and interest rates falling to record lows. Will the crunch cut demand for equity release by reducing the equity in homes, or boost demand because of the decline in income felt by the older unemployed and those living on savings?
• Full regulation of equity release products led to a major upturn in demand for certain products but was this a one-off event or something more permanent?
• The FSA is now set to regulate sale-and-lease-back schemes and this could have a positive impact on the equity release market. Equity release in some consumers' eyes has been tarnished by the same brush that led to a poor perception of sale and lease-back.
• Consumer research has indicated that currently equity release has scarcely scratched the surface of the potential market for equity release plans. What is needed to push penetration deeper?