THE equity release market showed signs of stabilising during the third quarter of the year on the back of rising house prices, figures showed today.
There was a 1.2% rise in the amount of money retired people unlocked from their homes during the three months to the end of September, with a total of £236.2 million withdrawn, according to trade body SHIP (Safe Home Income Plans).
The group, which represents 90% of the equity release sector, also reported a rise in the average amount people unlocked from their home, with this rising by 3.9% during the quarter to £45,434.
It attributed the increase to renewed consumer confidence in house prices following signs that the property market has stabilised.
But the equity release sector has not been immune from the problems in the wider mortgage market caused by the credit crunch, with the number of individual equity release plans taken out during the period dropping by 2.5%.
The group blamed the fall on a lack of liquidity in the market, which meant many lenders were unable to meet customer demand.
Andrea Rozario, director general of SHIP, said: "The drop in the number of plans sold can be partly attributed to the funding issues that the industry is currently facing.
"While equity release providers are experiencing high levels of customer demand, a significant impact on the quarter’s business figures has been the lack of liquidity in the overall market which has restricted the lending activity of some providers and resulted in the withdrawal from the market of some others."
The sector has suffered from a combination of the problems caused by the credit crunch and falling house prices, which have made people reluctant to tap into equity in their homes.
The amount of money unlocked during the third quarter was 22% lower than during the same period of 2008, while the number of individual customers taking out plans has dived by 35% year-on-year.
But despite the problems in the market, the average amount that people unlocked from their homes has actually risen by 19% since the third quarter of 2008.
Ms Rozario said: "This has been a challenging quarter in a difficult year. However, it is encouraging to see how well the equity release market is holding up compared to the wider remortgage market."
Equity release enables retired people to unlock money tied up in their home without having to move.
They can do this either by taking out a lifetime mortgage which is not repaid until they die or sell their home, or by selling a proportion of their property to a home reversion company.
Drawdown plans, under which people can unlock money in stages, continued to be the most popular, accounting for 52.2% of the market during the third quarter, followed by lifetime mortgages in which the money is taken as a lump sum at 46.2%.
But home reversion plans remained unpopular, accounting for just 1.2% of total business.
Earlier this week equity release group Key Retirement Solutions reported seeing a 19% rise in the number of plans taken out during the third quarter, while it said there was a 13% jump in the total amount people unlocked.