Equity release is growing in popularity as a way to free up valuable cash during retirement, and figures from the Equity Release Council show just how quickly this trend is emerging. Is it something you'd consider?
The growth of equity release
The figures show that the total value of equity release lending reached almost £1.4bn (£1.38bn) last year, the largest annual figure seen since records began in 1992, and 14% above the previous high of £1.21bn set in 2007. It also marks a significant annual increase of 29% and brings the equity release market back above pre-recession levels, as older homeowners benefit from rising property prices and increasingly use their housing wealth to improve their finances in later life.
The average value of equity release lending also hit a new record, with the typical customer releasing £64,787 in 2014, up 14% from 2013 and exceeding the previous record (£60,504 set in 1998) by 7%. The number of equity release customers, meanwhile, hit a six-year high, with 5,712 new customers recorded in the final three months of 2014, bringing the total number of new equity release customers in the year to 21,336, up 13% from 2013 and the highest annual total since 2008.
Nigel Waterson, chairman of the Equity Release Council, commented: "These lending figures show that 2014 truly has been a record-breaking year for the industry. Equity release is proving to be a crucial tool for financial planning in retirement, and is allowing retirees to improve their standard of living and give them more flexibility to support themselves or family members.
"Many retirees have more wealth tied up in property than anywhere else, so it is only logical that this forms part of their plan to enjoy a comfortable retirement… housing wealth is the one constant that many in this generation can rely on for support."
Clearly, equity release is becoming increasingly desirable, particularly with property prices having risen so much, as it means more homeowners have been able to increase their level of equity. But just what is it, and would you take the plunge?
Just what is equity release?
In a nutshell, equity release is a way to "unlock" a portion of the value – or equity – you have in your home, in return for cash. There are various plans that can be arranged that will allow you to take the cash as a lump sum or draw it down over a number of years, but essentially, it's still a loan (often referred to as a "lifetime mortgage") that will be repaid on death or when you sell the property.
This type of mortgage can only be arranged in later life and will only be suitable for those who have built up a decent amount of equity, and it means any inheritance you leave may not be as much as previously thought. But, for many, the chance to have a more comfortable retirement will be the biggest plus point, with the cash released providing a valuable income boost without needing to downsize.
How you spend the money is entirely up to you. Some people use it to clear debts while others use it as a valuable supplement to their income, with it helping to cover the rising cost of living so they can enjoy a comfortable retirement. Others may help out their children, and some could simply want the chance to go on the holiday they've always dreamed of.
If it sounds like something you'd consider, make sure to contact our no obligation equity release planning service to discuss your options, and see if you'll add to the growing number of homeowners taking the plunge.
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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