Annual equity release sales to double to £2.4bn over five years

These are the predictions of market leading equity release provider Norwich Union, part of Aviva, in its definitive report on the sector compiled to celebrate its 10th anniversary on 16 November 2008. Over this period, it has helped over 80,000 customers release £2.8bn worth of housing equity and seen the market move towards becoming a mainstream financial product.

Ten Years Beyond 2008 - The Key Trends:

Norwich Union believes that the market will see referral deals where consumers can access equity release products via large high street banks and building societies. This will build on an existing trend and lead to significant growth in this market over the next ten years.

With these new entrants, the total value of equity release sales could double to £2.4bn and a flood of new qualified intermediaries enter the sector. However, as they raise the standard of equity release provision, it is likely that advisers who only ‘dabble' in the sector will withdraw altogether and refer enquiries to specialist companies.

With key market drivers such as lack of pension funding, longer retirements and the Government encouraging consumers to fund themselves, the equity release market will rise to the challenge and improve existing products.

To accommodate consumers' increasingly indebted lifestyles, Norwich Union foresees the introduction of products that enable consumers to transfer directly from a residential mortgage into an equity release plan. These are likely to be provided by the existing players in the equity release market as they have the expertise and back office systems to administer them. With one in three consumers over 55 still owing money on their mortgages, Norwich Union believes that they are likely to be hugely popular and of real benefit to consumers.

As equity release becomes an increasingly accepted retirement funding tool, Norwich Union believes that traditional pension and inheritance tax planning specialists will add this product to their ranges - via white label deals with existing providers. The Government is also likely to become more involved in this market as it starts to work more closely with consumers and providers to solve the UK's retirement funding crisis.

The type of property that people can use for equity release is also likely to widen - however with certain inherent stumbling blocks - this move may not happen for several years. Going forward, the sector will continue to benefit from the lobbying activity of Safe Home Income Plans (SHIP) complemented by work from the Equity Release Solicitors Association (ERSA) and the Council of Mortgage Lenders (CML).

Anthony Rafferty, head of marketing, post retirement at Norwich Union, said: "We have been one of the leading providers in this market for ten years and have seen many developments and changes. We have helped over 80,000 customers release £2.8bn worth of housing equity, which has significantly improved the quality of retirement for many consumers.

"Going forward, we see the market doubling over the next five years and truly coming into its own as a mainstream retirement planning tool. With big high street names offering these products to their customers, more intermediaries gaining the necessary qualifications and equity release innovations taking into account consumers changing needs - the future for this market is bright."

Ten Years to 2008 - The Key Trends:

Over this period the average value of a property used for equity release has moved from being almost £40,000 (1999) more expensive than the average property to just over £22,000 (2008). This shift clearly shows that thousands of ordinary UK homeowners are now using these products to help fund their retirement - equity release is no longer simply for those with huge houses and relatively high property values.

Over this period, Norwich Union has also seen significant product innovations as lifetime mortgages dominated the market and drawdown mortgages were introduced. Drawdown products that allow consumers to reserve a ‘pot of equity' to release in the future now account for almost 60% of Norwich Union's sales - highlighting the importance consumers place on flexibility.

As the market has grown and developed over the last ten years, Norwich Union has also found that distribution channels have expanded and developed with more intermediaries entering the market, direct sales forces growing and some financial services partners on the high street entering referral deals.