At least one financial organisation is understood to be at an advanced stage in bringing a pure equity release product to the Irish market, following the introduction of Bank of Ireland's roll-up mortgage product Life Loan last week.

Although most Irish lending institutions are adopting a wait and see approach to Bank of Ireland's initiative, developments in the sector are expected shortly. With Bank of Ireland's product, older homeowners will be able to borrow up to 30 per cent of the value of their property, repayable when the borrower dies, or sells or vacates the property.

The Life Loan, which will be available from next February, will give homeowners aged 65 or over access to a lump sum of between £15,000 and £200,000, to be used for any purpose.

The initial tranche of funding set aside for the product is £30 million, which suggests Bank of Ireland may not be anticipating too strong a demand for the product. A large Irish financial institution could expect to do £30 million worth of business in four days' lending.

Other banks and building societies have steered clear of this kind of loan product in the past because of the perceived reluctance of Irish people to dilute their equity stake in the family home. Now those institutions will be watching Bank of Ireland's venture with great interest.

The Irish Permanent looked into this kind of product two years ago but encountered great resistance from test groups in their research. That dissuaded them from pursuing the matter at the time but a spokesman for the company said it was open to respond to changes in the marketplace.

He said Irish Permanent would wait and see if there was a clear market for the product but that the area was more problematic than people realised at first glance.

AIB has examined the possibilities for this type of product quite regularly in the past but considered it expensive for customers. According to a bank spokesman, market forces are now dictating that AIB needs to review the area again. He said there was nothing in the pipeline at the moment but that AIB would be watching Bank of Ireland's Life Loan with interest.

Mr Pat Farrell, marketing manager with EBS building society, said EBS was aware that there is interest in the product but that it was complex and would require detailed planning. He said EBS would continue to actively monitor the market potential but was not planning to introduce anything right now.

The difference between Bank of Ireland's Life Loan and a pure equity release product is that the loan arrangement has more uncertainties attached to it. The inheritance value of the property could be significantly eroded and even lost in their lifetime.

With equity release or home income plans in the UK, there is no lending or interest involved. The institution or third party buys a percentage of the equity in the property, which they collect on the death of the owner or when the house is vacated or sold.

Whether the house appreciates or depreciates in value over the term of the contract, the third party's percentage stake remains the same. The lump sum received is classed as a capital gain but would not be taxable because it is the proceeds of the sale of the person's principal residential property.

Whether or not such a product will be available in the Irish market before Bank of Ireland's Life Loan is sold, one thing is certain; older homeowners can expect to have a choice of ways to generate cash from their properties.

The effect that these released funds will have on the property market remains to be seen but it's likely some parents will use the opportunity to fund their children's deposit on a first home. It may also give some people a welcome alternative to trading down to meet the expenses of old age.