The Equity Release market takes another hit from lack of funding

Posted on 6 October 2009 by Ray Boulger

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In the latest blow to the Equity Release market Northern Rock has announced its withdrawal from that market, following on closely from the recent withdrawals of Coventry and Saffron. Northern Rock was one of the first lenders to enter this market and at one time was one of the top two lenders in this category. Furthermore, it was the only lender which offered a regular guaranteed monthly drawdown for life.

Voting is now taking place for the Equity Release Awards, with the winners being announced at a lunch on 13^th November. With ongoing serious funding constraints for the long term end of the market having now having forced several lenders to withdraw from their lifetime mortgage range there must be a serious danger that by 13^th November some of the winners will no longer be offering Lifetime mortgages.

This won’t be a reason to not offer an award to any of these companies if they win as the awards are based on achievements over the previous year. However, it will be a stark reminder that we are a long way from mortgage funding returning to normal. And this just a few days after the speech from MPC member David Miles on 30^th September explaining that a key objective of Quantitative Easing (QE) was to reduce the cost of long term borrowing. He said the reduction in corporate bond spreads has “…helped to encourage increasing gross and net corporate bond issuance.”

Despite this, if the success of QE is to be measured on David’s suggested measure of reducing the cost of long term funding it has so far proved spectacularly unsuccessful as far as funding for this longest of all long term mortgage markets is concerned!

Categories: Bank of England, House and home, Interest rates, Mortgages, Personal finance, Regulation

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