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Release firms won’t survive on wholesale funding

Equity-release providers which fund new business using wholesale markets are unlikely to have a future, according to Just Retirement.

The firm says banks, building societies and other providers will not be able to continue writing new equity-release business reliant on short-term funding.

The news comes after In Retirement, an equity-release prov-ider funded by the wholesale markets, went into administration. Firms such as Bradford & Bingley, Standard Life Bank and Bristol & West all used wholesale markets to fund new business and pulled out of the equity-release market last year.

Just Retirement chief executive Mike Fuller says: “Increasingly, there is recognition that the funding logically comes from life insurance companies as an investment of their annuity books. I do not see banks and societies coming back into this market. It does not make sense.

“The point here is that it might be called a mortgage but it is a life insurance policy. It is not a product that makes sense from a wholesale funding viewpoint. We have cashflows that work the other way on our annuity business so it is a nat-ural hedge for a significant annuity player. I do not expect those businesses to have much of a future.”

Retirement Plus is funded through the wholesale markets. Managing director Duncan Young says: “The people who fund themselves through the sale of annuities have a significant advantage but, against that, markets ebb and flow and there will come a time when deposit-takers will be more competitive than annuity providers.

“The question is whether there will be any deposit-taking funded equity-release providers still in existence when that ebb and flow comes the other way. The going is incredibly tough at the moment.”

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