Equity release is growing in popularity as a way to free up housing wealth and boost retirement incomes without needing to downsize, and as a result, the value of this form of lending is soaring to new heights.
New figures from The Equity Release Council show that homeowners aged 55+ withdrew a record £8.2m of housing wealth every working day during the second quarter of 2016 (April-June), equating to a lending total of £514.4m during the three-month period – the first time the quarterly total has ever surpassed £0.5bn.
This also marks an increase of 34% year-on-year – up from the £384.3m lending total of the same period in 2015 – and is 14% higher than the previous quarterly record set in Q3 2015, when £452.6m was lent in this way. Growth can similarly be seen in the number of equity release plans sold, with the number of new sales agreed (6,671) up by 23% year-on-year and representing the largest quarterly total since 2008.
The report noted that this increased appetite for equity release lending coincides with market developments, including new providers and an increasing choice of products and features, which will hopefully make it more viable for people to consider this form of lending.
All that released equity can be put to good use, too, with many using the proceeds to pay off existing mortgages and loans, provide extra retirement income, fund home improvements, and even gift money to family members as a form of 'living inheritance' – and there's no need to leave the family home.
Sound appealing? Little wonder, and as an added bonus, there are plenty of types of plan to consider. First up is the lump sum lifetime mortgage, which typically involves a large release of housing wealth in a single, lump sum payment – which could make it ideal for those who want to clear debts or gift money to relatives. This type of plan saw the strongest rise in popularity over the year, too, with £208.8m lent during the quarter – an increase of 37% from the £152.1m lump sum lending total of Q2 2015.
However, lending via drawdown lifetime mortgages continues to account for the larger market share, with the total standing at £304.0m (up 31% year-on-year). This kind of product allows customers to make multiple withdrawals of equity as and when needed, which could make it more suited to those who want to use their housing wealth to supplement their retirement income.
Home reversion plans, where the lender buys your home (or a portion of it) but allows you to continue living there, also experienced a rise during the quarter, although they still remain the least popular overall, with the total value of lending standing at just £1.5m (up from £623,647 in Q2 2015).
It's all looking good for equity release at the moment – and for the customers who opt for this kind of plan – as Nigel Waterson, chairman of the Council, comments: "These figures are the latest sign that UK homeowners increasingly see housing wealth as a fundamental part of their retirement funding plans. The long term rise of house prices has allowed many older homeowners to build up considerable reserves of housing equity, which have the potential to solve many of the financial challenges facing the UK's ageing population."
Essentially, using equity release could be a great way to help ensure you're on a stronger financial footing in later life, but it's important to remember that it won't be for everyone. Want to see if it's something you could benefit from? Consult our no-obligation equity release planning service to get an idea of whether or not it'll work for you.
Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
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