Poor pension cover drives down average age of equity release

The average age of homeowners using equity release schemes to free property wealth has fallen for the first time, specialist adviser Key Retirement Solutions (KRS) has reported.

The fall, from 71.6 years old in the second half of 2006 to 70.6 in the first half of 2007, followed the launch of new products open to a younger age group said KRS business development manager Dean Mirfin.

Mirfin added that homeowners approaching retirement were also finding that they had poor pension cover but were flush with property wealth and were driving the average age down.

‘This trend is expected to continue over the coming years as pension provision reduces,’ he said.

KRS’s first Equity Release Monitor showed that equity release across the UK continued to boom in the year to July, with the total number of plans taken out reaching 14,701, 18% up on the first half of 2006.

By value released the sector was up 33% over the period, while property drawdown, which allows homeowners to take cash in stages rather than as a lump sum, was up from 16% of the market in first-half 2006 to 44% in the same period of 2007.

On a regional basis the south east led growth, with new schemes up 40% to £165 million and average loan value up 36%, followed by the southwest with loans up 57% and values up 35%.

The monitor also showed a direct correlation between price growth and the amount of equity released, with London leading on loan size at an average £79,000, up from £46,000 in 2006, although Mirfin said this may be related to living costs.

Three new product providers had equity release plans ready to release to the market, Mirfin added, but were currently waiting for financing rates, which are linked to US bonds, to fall slightly.