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&#39Equity release could boost IFA business&#39

The equity-release market has the potential to be huge despite limited demand so far from IFAs and their clients, according to market analyst Datamonitor.

According to the company&#39s figures, the equity-release market was potentially worth £459bn last year but only £750m was realised.

Datamonitor says the actual level of business done was so much less than the potential market based on the amount of equity held in properties owned outright by people aged 65 and over because of low consumer confidence.

It believes retired people and IFAs have not forgotten the “horror stories” of the 1980s when poorly designed home-income plans left many policyholders financially devastated.

Datamonitor places the onus on equity-release product providers to change perceptions to take advantage of the market which it says is set to grow to £578.9bn by 2006.

The company says equity release can be fruitful for IFAs although only a few small and specialist advisers are currently involved in the market.

Datamonitor says the sector could provide IFAs with a new income stream to overcome the problem of falling commission levels and could create an opportunity to cross-sell investment products.

Analyst Edward Ripley says: “Traditionally, there has been relatively little commitment from mainstream lenders to develop this market.

“However, the last few years has seen a number of recent entrants. Norwich Union and Northern Rock are perhaps the two most prominent examples as both are fighting for leadership. Others include Scottish Widows and Legal & General.”

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