Last week, the building society – which entered the sector in early 2008 – pulled its equity release range, citing the current market conditions for its decision. Coventry’s exit is another significant blow for the sector, with rival provider Retirement Plus yet to clarify
its plans for the future, following its decision to withdraw in April (“Retirement Plus suspends new cases”, www. mortgagesolutions-online.com, 22/04/09).

A spokesman said the building society would continue to service existing clients, but could not put a date on a return to the sector, admitting that it ‘may be some time’.

“The cost of long-term funding for this type of lending is creeping up. As a result, we will not be offering any new equity release products. We felt it was fairer to remove the products with a view to re-entry when times are more benevolent.”

Stuart Wilson, managing partner of Equity Advice, said the news was ‘no surprise’, given the difficulties faced by the building society sector.

He explained: “In the current lending market where lenders are relying on retail funds the product is becoming increasingly difficult to price. The capital providers lend is tied up for 20 years and there is no quick return. Lenders need that money for short-term
finance.”

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Wilson warned that it is unlikely for Coventry to be the last to exit the market, because of the funding pressures lenders were currently facing.

He added: “I can see at least another lender, if not two, having to exit by the end of the year.”

Colin Taylor, chief executive of Key Retirement Solutions and chairman of Specialist Advisers for Equity Release (SAFER), said the exit had been on the cards for some time because of the effect of the FSA’s capital adequacy rules on business operations.

He commented: “I can see other lenders suspending equity release too, starting with the building society sector first, followed by any small lenders that rely on swap rates.”

Anthony Harris, chairman of Independent Equity Release Adviser Alliance (IERAA), expressed his disappointment at the withdrawal because the building society offered ‘something different’ to its competitors.

Harris commented: “Other providers who have exited, such as Retirement Plus, also offered something different, so this has hit quite hard and puts the power back in the hands of the ‘big boys’, the larger providers. With lenders pulling out, the need for wide ranging advice on equity release is even more vital than ever. We need to see
more innovation in the sector, not providers retreating.”