Saffron Building Society has announced it is to withdraw, albeit temporarily, from the equity release market after meeting its lending targets for this year.
It has taken this action following a successful year of lending in which 2009 targets have now been met. Also by Saffron withdrawing from the sector now will ensure their lending portfolio remains balanced and within borrowing strategy.
A sensible approach maybe?
However, this follows the latest setbacks to the market, which has resulted in lenders pulling their products or even positioning themselves so as to reduce their exposure to the equity release market.
This has added in a long line of lenders removing their equity release schemes over the past 12 months; we had Retirement Plus who had funding issues, Dunfermline hit by the credit crunch & Godiva who recently felt longer term funding was too expensive & consequently decided to ‘temporarily’ withdraw from the equity release market.
Also, recognized lenders such as Bradford & Bingley, Standard Life and Bristol & West whom all used wholesale markets to fund their new business, pulled out of the equity release market last year.
Who knows if any of them will be back – certainly not in the short term?
Last week New Life Mortgages reviewed its equity release product range. The New Life Gold product which offers their highest release possible, had its maximum facility slashed by 8%, effectively ruling itself out of the maximum loan end of the market. It also withdrew both drawdown products which are now under review & possibly re-introduced later this year.
But it’s not just the equity release companies who have been affected. Intermediaries too are under financial pressure with this niche product.
We had the news recently that Newcastle Building Society are to withdraw their equity release advisory service by the end of the year. They have offered advice on equity release schemes since 2006 & stated the decision was due to the ‘considerable contraction’ in the equity release sector.
In Retirement Services, a prominent player in the tied sales force environment went into administration at the end of July with again lack of funding & a purchaser for the business not found. If a company who had been in the market since the 1990's is left floundering, what is left for the rest of the equity release market?
Well, the demand for advice in equity release is still high, but with providers and specialist equity release brokers withdrawing from the market, as economic conditions become more strained, only points to one outcome.
Lenders want consumers to have choice & access to good quality advice. Hence, the departure of such lenders & brokers and also their competitive equity release schemes means in the current climate – ‘only the tough will survive’.
Equity release companies who position themselves carefully, without too much exposure are the ones who will deliver in the long term & ride out the current storm.