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Pru quits equity release

by: Mortgage Solutions
  • 30/11/2009
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Turbulence in the equity release market continued last week, after Prudential became the latest provider to exit the beleaguered sector.

The insurer, which has offered lifetime mortgages since 2004 and has a £1bn equity release book, will stop writing new business in the first quarter of 2010, following its decision to deploy capital to other parts of its operation.

Prudential has joined a long list of providers, including Saffron Building Society, Coventry Building Society and Northern Rock who have either withdrawn from the sector or suspended new lending since August. 

Barry O’Dwyer, director of retail, life and pensions at Prudential, said it believed more attractive returns on capital could be found in other areas of the retirement market.

He explained: “For lifetime mortgages, a significant cash expense is incurred upfront in acquiring new business, and the payback period on capital employed is long. We have concluded that this is not sustainable and that we can deploy cash and capital more effectively across other parts of our business.”

Dean Mirfin, business development director at Key Retirement Solutions, said he was surprised that Prudential had pulled out of the market, but pointed out that its market share had dropped from 23% at the end of 2008 to 12% during 2009.

He said: “Prudential was not as competitive as other providers because it tweaked its products and trimmed back its LTVs, so its exit is a disappointment, but it should not be seen as a massive setback.”

However, its withdrawal prompted most of the remaining equity release providers including Aviva, LV=, Just Retirement, Home & Capital to reaffirm their commitment to the market.

Andrea Rozario, director general of Safe Home Income Plans (SHIP), also took steps to reassure consumers that the lifetime mortgage market remained strong.

She said: “While Prudential may have withdrawn from the equity release market, consumers can still find an equity release product which suits them and their individual circumstances.”

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