More needs to be done to promote the value of equity release to elderly homeowners, according to the Council of Mortgage Lenders (CML).
The organisation has found that although more than £400bn worth of equity is held in property by elderly home owners, just 1% release it.
As a result, the CML believes that lenders, the Government, regulators, IFAs and consumer groups need to make a concerted effort to develop the equity release market.
Peter Williams, deputy director general of the CML, said: ‘Value for money and risk are key issues to be addressed in the development of equity release products. A co-ordinated effort among interested parties could lead to the development of well-regulated, standard equity release products that can satisfy a variety of needs in older age.’
But while penetration remains low, research from Safe Home Income Plans (SHIP) has indicated the market is growing and reported an increase in the number of homeowners cashing in on equity release products. For the first half of 2001, 5,800 equity release plans were sold compared with 5,300 in the first half of 2000.
Mark Goodale, chairman of SHIP, said: ‘There has been an increase in the number of people taking equity release products for a number of reasons. People are more confident in the products offered as they have better protection and there is a greater supply of product providers available. There is also a changing attitude to inheritance. People are taking a broader view and instead of thinking of their property for their children, they are needing the income and taking advantage of this.’
Goodale expects growth to continue in equity release. He said: ‘With the roll back of the welfare state, people are looking towards their long term needs. The demand will get stronger and there will be more providers in the market.’
Features of the equity release market that would help address borrowers’ concerns
• The provision of equity release as a mainstream product by lenders, which would help to reduce costs for consumers.
• Standardised products that would help bring competition to the market.
• Easily understood and, if possible, familiar product features.
• The ability to draw down equity in bite sized chunks, thereby allowing borrowers access to the smallest amounts of funding they may require and helping them to preserve property appreciation for inheritors.