Demand for lifetime mortgages is growing as asset-rich retirees seek to unlock value from their homes in the face of declining annuity rates. Lifetime mortgage sales at Legal & General (LGEN) exceeded individual annuity sales for the first time during the first half of the year, surpassing £200m and up on the same time in 2015. Business was buoyant all round for the life insurer, with sales from individual annuities, lifetime mortgages and bulk annuity transactions totalling £4bn during the first six months of the year.
Legal and General had previously flagged its intention to shift towards its bulk annuity business and away from individual annuities. The latter require a greater proportion of capital to be held against them under Solvency II regulations, since this type of long-term guarantee is exposed to risks including longevity. Management expects the decline in sales of personal annuities to continue in favour of equity release, as baby boomers fund their retirement via the wealth tied up in their homes.
JRP Group (JRP) - recently formed via a merger between Partnership and Just Retirement - has also benefited from this trend. During the first three months of the year, the largest provider of lifetime mortgages secured £149m in sales of the product, up 67 per cent on the respective previous period. Meanwhile, Just Retirement grew revenue for lifetime mortgage loan advances by half to £237m during the final six months of 2015. However, despite the introduction of pension freedom changes last year, sales of guaranteed income for life products rose marginally to £163m.
The popularity of equity release has been steadily rising since 2011, according to figures from the Equity Release Council. The value of housing wealth released by homeowners over the age of 55 was the largest of any half-year on record during the final six months of 2015 at £898m, pushing the annual total to a high of £1.6bn. What's more, the volume of plans agreed rose by a fifth between the first and second half of last year, substantially more than any other year post-2008.
