Our market
Equity release provides a means for homeowners in retirement to use their homes to generate cash, either through a home reversion plan (selling all or part of the property but continuing to live in it during their lifetime) or a lifetime mortgage (a mortgage repayable on death). More information on theses products is given in the section on Home reversions and lifetime mortgages.
The capital embedded in people's homes can be used to compensate for inadequate savings, pensions and annuities. Equity release is available as a financial planning tool to the 70% of the over 65s who own their home, helping them to improve their lifestyles and plan for contingencies, such as long term care. It is also expected to feature prominently in pension planning in the future. Many people taking advantage of equity release spend part of the money raised on holidays or other leisure pursuits to lead a fuller life.
The Institute of Actuaries divides the potential customer base for equity release into three categories:
- Survival’ – to meet basic financial needs/pay bills
- ‘Lifestyle’ – to enhance own lifestyle (and property)
- ‘Altruistic’ – to be able to make financial gifts to family and friends
Source: Institute of Actuaries - Equity Release Report 2005
The importance of equity release in meeting the needs of retired homeowners is increasing. In 2007 the value of equity release plans written exceeded £1.2bn. More on market size and growth.
Safeguards afforded to homeowners taking out equity release plans (and their relatives) are described under Consumer protection.
Home reversion regulation introduced in April 2007 has created a level playing field for the equity release market which is now fully regulated by the FSA. It has also increased expectations that home reversions will be the fastest-growing segment of the equity release market in the next few years. The graph below shows total home reversion business written by SHIP members over the last ten years. Transactions reached a low point when lifetime mortgage regulation was introduced in 2004. There has been some recovery from this point, with transactions having nearly doubled in the last four years. Following regulation and with a change in economic climate, growth of this sector is expected to accelerate.
Source: SHIP