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Equity release mortgages slow

Demand for home equity release mortgages slowed down towards the end of last year although the market still grew by 60% over the year, according to the second detailed analysis of the industry by actuary Trowbridge Deloitte.

Tuesday, April 29th 2008, 6:00AM

by Maria Scott

By the end of 2007 there were $365 million of equity release loans outstanding a 60% rise on the $227 million recorded at the end of 2006.

Rob Dowler, executive director of SHERPA (Safe Home Equity Release Plans Association), which supported the Trowbridge research said: "Growth in total loan balances remains strong but below earlier expectations for the year, reflecting the difficult credit market conditions for lenders in the latter half."

Dowler forecasts that if growth in settlements continued at its present rate, the market could exceed $500 million by the end of this year."

The Trowbridge research showed that the average age of borrowers was 74 last year and the average size of their loans $55,700. The North Island counted for 71% of equity release loans. The largest age group was 70 to 79 year olds but the 60 to 70 year olds were a growing segment of the market.

Fixed interest loans accounted for more than 10% of loans last year and 99% of loans were for lump sums rather than 'income stream' equity release mortgages. The most common use for lump sum equity release loans was for home improvements, representing 28% of loans with the next most common use being for debt repayment. Only about 53% of approved loans are accessed immediately, down from 60% in 2006.

Mortgage brokers and advisers accounted for 60% of sales.

The slowdown noted towards the end of last year coincides with plans by market leader Sentinel to scale back its operation in anticipation of reduced demand. The company, which has also increased its interest rate, believes that concerns about stagnant or falling house prices may deter older borrowers from taking out equity release loans.

Despite the quieter market Rob Dowler said that demand would be underpinned by the high proportion of New Zealand wealth tied up in housing.

Trowbridge's research also showed that more than 75% of loan discharges were due to voluntary repayments and the sale of property. Only about one in five discharges were due to death or a move to aged care facilities.

Dowler said this reinforced the flexibility offered by equity release loans. "Loans are often used for short term purposes and repaid once finances are available."

« Market perceives that Bollard softens the rhetoricHome loan report: Hope at last »

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Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
ANZ 5.19 4.05 3.95 4.49
ANZ Special - 3.55 3.45 3.99
ASB Bank 5.20 4.05 3.95 4.39
ASB Bank Special - 3.55 3.45 3.89
BNZ - Classic - 3.55 3.45 3.99
BNZ - Mortgage One 5.90 - - -
BNZ - Rapid Repay 5.35 - - -
BNZ - Std, FlyBuys 5.30 4.45 4.35 4.55
BNZ - TotalMoney 5.30 - - -
China Construction Bank 5.50 4.70 4.80 4.95
China Construction Bank Special - 3.19 3.19 3.19
Lender Flt 1yr 2yr 3yr
Credit Union Auckland 5.95 - - -
Credit Union Baywide 6.15 4.95 4.95 -
Credit Union North 6.45 - - -
Credit Union South 6.45 - - -
Finance Direct - - - -
First Credit Union 5.85 3.99 4.49 -
Heartland 6.70 7.00 7.25 7.85
Heartland Bank - Online - - - -
Heretaunga Building Society 5.75 4.80 4.95 -
HSBC Premier 5.24 3.35 3.35 3.35
HSBC Premier LVR > 80% - - - -
Lender Flt 1yr 2yr 3yr
HSBC Special - - - -
ICBC 5.15 3.18 3.18 3.20
Kainga Ora 5.18 4.04 3.95 4.39
Kiwibank 5.80 ▼4.14 ▲4.30 4.64
Kiwibank - Capped - - - -
Kiwibank - Offset 5.15 - - -
Kiwibank Special - ▼3.39 ▲3.55 3.89
Liberty 5.69 - - -
Napier Building Society - - - -
Nelson Building Society 5.70 4.25 4.15 -
Pepper Money Near Prime 5.64 - 5.44 5.44
Lender Flt 1yr 2yr 3yr
Pepper Money Prime 5.18 - 4.98 4.98
Pepper Money Specialist 7.59 - 7.39 7.39
Resimac 4.50 4.86 3.89 3.94
RESIMAC Special - - - -
SBS Bank 5.29 4.85 5.05 5.49
SBS Bank Special - ▼3.55 3.39 3.89
Sovereign 5.30 4.15 4.29 4.55
Sovereign Special - 3.65 3.75 4.05
The Co-operative Bank - Owner Occ 5.15 3.49 3.59 3.89
The Co-operative Bank - Standard 5.15 3.99 4.09 4.39
TSB Bank 6.09 4.35 4.25 4.69
Lender Flt 1yr 2yr 3yr
TSB Special 5.29 3.55 3.45 3.89
Wairarapa Building Society 5.70 4.85 4.99 -
Westpac 5.34 4.15 4.09 4.49
Westpac - Offset 5.34 - - -
Westpac Special - 3.55 3.45 3.99
Median 5.34 4.04 4.09 4.39

Last updated: 15 November 2019 4:16pm

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