Despite optimistic predictions about the equity release market in years to come it seems that equity release is currently following a similar trend as the sub prime crisis. Last month a report published by the Pensions Policy Institute suggested that equity release could increase by up to a third among pensioner households within 21 years. This would be a huge increase in demand with an estimated 5.2 million households potentially benefiting from this product. Interestingly, Key Retirement Solutions suggested that the equity release market is on course to mirror that of the sub prime crisis.

So what does that mean for the industry? Well, according to the report there will be a consolidation of the industry where many of the smaller players leave the market. This leaves only a hand full of big players, which reduces choice for consumers and can in some cases lead to higher prices. We can see this trend already taking shape as a number of players including Coventry and Saffron Building Society have recently opted out of the market. One of the main reasons cited for this movement is that the industry is going through funding issues.

What we are likely to see is a bottle neck in the industry between supply and demand as on the one hand research indicates that there is a growing equity release market, while on the other players are dropping out of the market. The net result is that the players that are left in the marketplace are inundated with business, which they may not be able to or want to handle. This will have implications on customer service and overall competitiveness.

One would hope that in time more players would enter the marketplace to take advantage of the huge demand that exists for this type of product.