SHIP, the equity release provider trade body, figures reveal a 16% increase in the average sum released, from £41,718 (Q1 2008) to £48,287. This indicates that at a time when property values have fallen customers are borrowing a greater percentage of the properties value. This comes at a time when drawdown plans offer greater flexibility than ever, allowing those taking out a plan to draw an initial amount and then come back when more is needed. Key question whether clients are being appropriately informed of the benefits of, and indeed being advised on, drawdown.
At a time when the trade body reveals a 16% increase in loan size, Key's own figures for the same period show a fall in average advances of 15%, driven primarily by the levels of initial advances from drawdown plans. Key's business levels account for approximately 20% of the equity release market.
Dean Mirfin, Key Retirement Solutions’ group director, said: "We continue to be concerned that drawdown is not being adequately investigated. The market figures do not appear to be reflective of the product range available to the market, and we are concerned that consumers are borrowing higher levels against their homes which have been falling in value, and that consumers are potentially being excluded from the savings which drawdown offers. Consumers benefit from the fact that interest only accrues on the amounts which have been drawn which can result in savings of many thousands of pounds. Taking in excess of what is needed at a given time can be a very costly experience.
"Comprehensive, and specific, factfinding is needed to reflect the range of solutions and consumer priorities. We are concerned that the figures released by the trade body are showing a worrying trend. Consumer group Which? commented this week that the early stages of a mystery shopping exercise into equity release, which is still ongoing, showed evidence of inadequate factfinding. Whilst we do not believe that the early findings ultimately will be reflective of the industry as a whole, we are concerned that this may be in part reflective of some who are not specialists in this market.”