Nine out of 10 equity release providers expect the volume of new business to increase in 2009, research has shown.

The market is expected to grow by £200 million during the coming year to have a value of £1.4 billion at the end of 2009, rising to £1.7 billion in 2010, according to trade body Safe Home Income Plans (Ship).

Lower interest rates are set to increase the market as pensioners turn to their home to fund their retirement.

A massive decrease in the returns paid on savings accounts is also likely to have an impact on the equity market, as retired people are no longer able to use the interest paid on their deposits to boost their retirement income.

But the continuing falls of house prices, and a general lack of understanding about how equity release works, is potentially one of the biggest challenges facing the market, according to Ship.

Equity release enables homeowners to tap into the value of their home without having to sell or move out.

This can be done by either taking out a lifetime mortgage which is not repaid until they die or sell their home, or by selling a proportion of their property to a home reversion company.

Draw-down plans, which allow people to borrow money when they need it, rather than having to take it all in one go, are expected to become more and more popular, and account for 70% of the market by 2010.

But the majority of providers expect the number of home reversion schemes taken out to either fall or remain the same during the first three months of 2009.

Andrea Rozario, director general of Ship, said that due to the deepening economic recession, 2009 would be an "unpredictable" year.

He said: "Many repercussions from 2008 will continue to be felt across the industry as a whole. This survey has shown that Ship members remain confident in the future of the equity release market, as they consider the long-term prospects."

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