Rising house prices has stabilised the equity release market

The equity release market showed signs of stabilising during the third quarter of the year on the back of rising house prices, figures have shown.

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people unlocked from their homes during the three months to the end of September, with a total of £236.2 million withdrawn, according to trade body SHIP (Safe Home Income Plans).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.