Equity Release Schemes show mortgage lending slide in first quarter

Equity Release Mortgage provider has reported a 24% year-on-year fall in equity release lending in Q1 of 2009.

Total Equity Release lending has fallen from £240 million to £183 million. As a direct result the average loan amount has fallen by 15.33% to £44,948 (2008 Q1 – £53,084).

Equity Release Market Monitor for Quarter 1 of 2009 shows that the mixture of a 7% drop in plan numbers and a 16% drop in house prices has resulted in a fall in lending for the sector of almost 24%. This is the largest fall KRS has recorded since it began monitoring the sector in 1998.

The average property price in all regions of the UK has fallen dramatically with falls a high as 26% in East Anglia, 24% in Scotland and 20% in the East Midlands. London fared best with a 6% fall. With such dramatic property value changes KRS says there is no way that the equity release market could not be unaffected.

London continues to show the largest average amount released at £91,845, followed by Northern Ireland at £53,850. However, Northern Ireland has seen a considerable stall in plan numbers with a 66% fall in the number of plans being arranged.

Despite a reduction in the number of plans taken out during the quarter and in the values, some regions showed positive growth. East Anglia and the West Midlands showed an increase in both plan numbers and levels of borrowing.

The Market Monitor continued to show that the most popular use of the equity released from consumers’ homes was for home or garden improvements (58%). One in three (33%) used the money to go on holiday and 19% used it to help out family or friends, as parents are helping their children to get onto the property ladder or helping them meet their commitments in the current economic climate.

Debt repayment is consistently one of the prime motivators for releasing equity, with 23% repaying an outstanding mortgage and a further 33% repaying other forms of debt.