£290m taken in equity release in 2008

Some £290 million has been extracted from the value of property in the UK through equity-released schemes in the first quarter of 2008.

That is the key finding of a study carried out by Key Retirement Solution (KRS), which also reports the average amount released has increased from £48,000 to £53,000.

To date this year, more than 6,000 retirees took equity from their homes.

However, demand for new plans has fallen amid wider concerns in the mortgage industry.

"It has been a difficult start to the year for many people as the fall out of the credit crunch has hit home and we are faced with volatile and uncertain economic and market conditions," said Dean Mirfin, business development director at KRS.

Gross lending on traditional home loans is down six per cent year on year in February, according to the Council of Mortgage Lenders (CML) – a slowdown which has also been reflected in the equity release market.

However, the disruption seen in the wider market as a result of the credit crunch has not impacted as dramatically on this sector.

"Unlike the mainstream mortgage market we have not seen an upheaval in either rates or the ability of providers to lend," said Mr Mirfin.

"This is testament to the fact lenders are fully committed to the equity release market. We have seen positive increases in the number of enquiries as the quarter has progressed, which once filtered through to the second quarter should reflect positively in the results at the half way stage of the year."

Drawdown - whereby you decide on a maximum amount of equity you want to release and then 'drawdown' the cash in stages - continues to be the plan of choice for most retirees.

This type of plan has seen a 29 per cent increase year on year in the number of drawdown plans being taken out, and as a result drawdown accounted for nearly two-thirds (62 per cent) of all plans taken out in the first quarter of 2008.

The average age of an equity release customer has also fallen from 69 to 68 over the last three months.

Finally, the report also finds the main use for equity release in the first quarter of this year was to make home or garden improvements (61 per cent), followed by taking a holiday (35 per cent).