SEVEN YEAR HIGH IN BUILDING SOCIETY LENDING, EQUITY RELEASE LOANS AT RECORD LEVELS

12.00.00am BST (GMT +0100) Thu 19th Jun 2003

Vincent Cable MP, Lib Dem Shadow Secretary of State for Trade and Industry

With new reports of 7 year high levels of Building Society lending and record levels of equity release loans, Vincent Cable MP, Liberal Democrat Shadow DTI Secretary, called on the Government to act quickly to deal with ballooning levels of debt and to act against aggressive lenders.

Dr. Cable said: "An astonishing £650 million of Equity Release loans were advanced last year. This is an extremely worrying development, particularly taken with the present view that current levels of house price inflation are unsustainable.

"Along with record levels of debt, lower disposable income and weak pay growth, any downturn in the housing market will prove to be severe for both heavily mortgaged homeowners, lenders and the economy.

"Moreover, collapsing asset values have the potential to bring into question the stability of lending institutions, which have lent substantially against assets at inflated values.

"The developing market for Equity Release Schemes, particularly targeted at pensioners whose pension provisions are proving to be inadequate, is adding fuel to the fire. Certain of these schemes will not fall under the regulatory control of the Financial Services Authority.

"The Government must correct this immediately to avoid the scope for another mis-selling crisis - yet again pensioners would be the most vulnerable.

ENDS

Notes for Editors:

Figures released by the Building Societies Association today showed:

• Building society gross advances amounted to £3,729 million in May 2003, increasing from £3, 385 million in May 2002.

• Net advances were £1,535 million in May 2003, up from £1,122 million in May 2002.

• Approvals (loans agreed, but not yet made) increased to £4,599 million in May 2003, from £3,839 million in May 2002.

Figures released by the Council of Mortgage Lenders yesterday showed:

• the amount of equity release lending outstanding in the market was more than £1.5 billion at the end of 2002.

• around £650 million of equity release loans were advanced during 2002, accounting for some 16,000 of the estimated 38,000 outstanding equity release loans.

• the potential for equity release lending is high. With an

"asset-rich, cash-poor" ageing population, the potential size of the equity release market could be between £50-100 billion.