SHIP providers buck market trend

Equity release trade body Safe Home Income Plans (SHIP) has revealed that business volumes produced by its members in the second quarter of the year have increased by 14% over volumes in quarter one, reports Mortgage Solutions.

A total £275.7m of equity was released by SHIP members in the second quarter, 14% higher than the £242.7m released in the first quarter.

Andrea Rozario, director general of SHIP, said results underlined the robust health of the equity release sector despite the impact of the credit crunch that was having such a negative effect on the mainstream mortgage market. She explained: “It also serves to highlight the distinctly different forces that drive the equity release market relative to the mainstream market, including the fundamental pressures of the UK’s ageing population, falling levels of pensions contributions and the very high levels of personal wealth held in housing equity.”

SHIP said that in terms of distribution, the intermediary channel continued to dominate, although the percentage of total equity release business carried out relative to the direct channel fell slightly from 74% in the first quarter of 2008 to 71% in the second quarter.

Equity release and the credit crunch

How is the credit crunch affecting equity release?

Product wise, not at all. There are no signs of any providers being short of money or changing their products.

As for potential clients, the impact seems to be more significant.

It seems that some people are standing still, even it they’re not quite sure why. They see constant stories in the media about falling house prices, rising costs of petrol, electricity, gas and groceries. Uncertainty breeds inactivity.

Maybe they are thinking “Things are uncertain and I don’t feel confident, so I will hold off doing anything.”

Is this the right approach?

Probably not. With the cost of living always rising, the need for equity release is greater than ever.

If the concern is about falling house prices, then the situation may get worse before it gets better. In which case, delaying action for a year or two may reduce the amount clients can release.

People should only take action that they feel confident about, but it is important to remember the guarantees that equity release plans from SHIP members provide.

Furthermore, with plans available that guarantee a proportion of the property can be protected as an inheritance, there is a strong case to be put for not letting the current concerns cause a delay in action.