Market Stats & Potential
So why do people release equity?
Reason for Loan 2009-2011
0.00 5.00 10.00 15.00 20.00 25.00 30.00 35.00
Treat family
Current std of living
Mortgage/debt repayment/settle bills
Medical care
IHT Planning
Home improvements
Holidays
One-off purchase
Percentage
Source: LV=
Current trends
Supporting family is a growing category:
School/university fees
House deposits
Weddings
Divorce settlements
Source: LV=
Current trends
The ‘luxury purchase’ is showing signs of recovery:
Purchase of holiday home/caravan/motorhome
Property development
Financing business ventures
Extended holidays
Source: LV=
Unusual cases
And some of our more unusual cases…
Face lift
Cosmetic dentistry
Solar panels
Charity rally driving trip
Source: LV=
Case study – property purchase
Pension not enough to cover regular bills
Still working part-time
Had a fall – unable to maintain property
Retirement development – great location and support package available
Needed cash to make up shortfall in purchase price
Simultaneous purchase and release of equity
Case study – delaying moving home
Properties in UK and Portugal
Income from overseas property reduced
Cost of UK healthcare insurance increased, value of shares decreased
Unwilling to sell either property at a loss
Cash released has paid healthcare premiums and offset loss of income from overseas property
Case study – helping grandchildren
Inherited property – needed external and internal works
Wished to contribute towards grandson’s school fees
Took a larger initial sum to pay for work to property
Releases smaller tranches to pay each term’s fees
How has this market performed?
Year Volume of plans sold
Value of plans sold (£m)*
2005 24,392 1,104
2006 27,772 1,154
2007 29,293 1,210
2008 28,224 1,096
2009 20,493 946
2010 17,574 804
2011 16,095 789
Key points:Peak in volume and value 2007Followed by mortgage ‘crash’ of 20082009- introduction of drawdown arrangements2011 – total value of plans is down slightly over 2010, but the final two quarters showed a strong recovery. In fact, the Q4 performance was the strongest for two yearsThe green shoots of recovery?
* Assumes house prices remains static Figures from Mintel Equity Release Report, May 2011 and SHIP press release January 2012
And the future?
Key pointsSHIP, lenders and advisers alike are working very hard to raise profile of equity release
Increasing recognition that ER needs to be one of the cornerstones of retirement planning
We believe the future is bright for equity release
* Assumes house prices remains staticFigures from Mintel Equity Release Report, May 2011Note that the 2011 figure used here was Mintel’s estimate only and they have used this to project forward to 2015. 2011 figures were lower than estimated
Year Volume of plans sold
Value of plans sold (£m) *
Percentage change(value of plans)
2005 24,392 1,104
2006 27,772 1,154
2007 29,293 1,210
2008 28,224 1,096
2009 20,493 946
2010 17,574 804
2011 16,095 789
2012 23,748 986 +14%
2013 25,744 1,062 +8%
2014 27,701 1,131 +6%
2015 28,322 1,152 +2%
Future market potential
So, why do we think the future is bright?
UK population will continue to expand and age, putting further pressure on public funds
Lower than expected investment returns
Low pension participation and falling annuity rates
Rising cost of care
Longer life expectancy
Property prices can generally be relied on to grow over the long term
The market has changed
There is no longer a single market for equity release ‘but rather several markets, defined by different customer, product and advice needs’
Six main customer types:
55+ with long term care needs (ineligible for state-funded care)
Vulnerable low-income older homeowners with debts (‘last resort’ cases)
Low-income older homeowners struggling to make ends meet
Newly retired with adequate income and high lifestyle expectations
Approaching/in retirement and financially comfortable (‘aspirational’ cases)
High income, high asset base looking to mitigate tax liability
Source – SHIP & Mintel Equity Release Report, May 2011.
Product innovation
Innovation essential to stimulate market recovery
Focus on ERCs
Inheritance protection
Interest repayments
Flexible drawdown options
Additional guarantees
Impaired lives
Reduced minimum ages
Mix and match
Intermediaries play a vital role
Source – SHIP (Mintel Equity Release Report May 2011 and SHIP 2011 year-end figures)
Share of Equity Release Sales by Distribution Channel
5363 63 67
7889
4737 37 33
2211
0
20
40
60
80
100
120
2006 2007 2008 2009 2010 2011
Year
Per
cen
tag
e
Direct
Intermediary
Any questions?
About LV=
For financial adviser use only.
Not to be used after 5 April 2012
LV Equity Release Limited, Keynes House, Tilehouse Street, Hitchin, Herts, SG5 2DX.
LV= is a registered trade mark of Liverpool Victoria Friendly Society Limited and a trading style of the Liverpool Victoria group of Companies. LV Equity Release Limited is registered in England (No 1951289) and is authorised and regulated by the Financial Services Authority (register number 306287). Registered address: County Gates, Bournemouth, BH1 2NF. Tel: 01202 292333.
21223709 01/12
About LV=
For financial adviser use only.
Not to be used after 5 April 2012
LV Equity Release Limited, Keynes House, Tilehouse Street, Hitchin, Herts, SG5 2DX.
LV= is a registered trade mark of Liverpool Victoria Friendly Society Limited and a trading style of the Liverpool Victoria group of Companies. LV Equity Release Limited is registered in England (No 1951289) and is authorised and regulated by the Financial Services Authority (register number 306287). Registered address: County Gates, Bournemouth, BH1 2NF. Tel: 01202 292333.
21223709 01/12
About LV=
For financial adviser use only.
Not to be used after 31 July 2012
LV Equity Release Limited, Keynes House, Tilehouse Street, Hitchin, Herts, SG5 2DX.
LV= is a registered trade mark of Liverpool Victoria Friendly Society Limited and a trading style of the Liverpool Victoria group of Companies. LV Equity Release Limited is registered in England (No 1951289) and is authorised and regulated by the Financial Services Authority (register number 306287). Registered address: County Gates, Bournemouth, BH1 2NF. Tel: 01202 292333.
21223709 01/12
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