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Housing wealth fuels Equity Release

Housing wealth fuels Equity Release

Category: Retirement

Updated: 03/03/2014
First Published: 03/03/2014

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

With many pensioners finding their retirement income stretched due to meagre pension pots and disappointing annuity rates, it seems they are turning to the property market to give them more comfort in later life.

According to the Equity Release Market Report the typical amount of equity released from property wealth over the last three years has risen by 16% to £56,917.

Interestingly, 16% is also the increase seen in average property wealth of the typical equity release customer since 2011, with their average property price standing at £254,943 – 5% more than the UK average.

Equity customers are clearly benefitting from property price hikes – a 13% rise in UK house prices since 2011 – but with them releasing less than a quarter of this housing wealth – 22% in 2013 – it is clear their borrowing attitudes are stable.

Equity release plans can be an excellent way to increase your financial wealth in retirement by unlocking some of the value of your home without you having to move out. However, they need to be considered very carefully with regard to whether they are right for you and you must be sure to do your homework before you commit to any scheme.

The low borrowing rates currently available are also fuelling the equity release market with the average interest rate on equity release products currently standing at 6.36%. At the same time credit card and overdraft rates have risen sharply, making equity release seem an even more attractive prospect and the low rates seeing less of your property wealth eaten away by interest.

"The equity release market has come a long way in recent years both in terms of pricing and the features available and it can offer an attractive solution for those elderly homeowners who are asset rich but cash poor," said Richard Eagling, head of pensions at Moneyfacts.

"At a time when retirement incomes remain low, it seems inevitable that rising property prices will persuade more retirees to tap into the value locked up in their homes in the coming year."

The total annual value of equity release plans taken out since 2011 has risen by 36%, with 59% of new customers in 2013 falling into the 65 – 74 year old bracket – an increase of 3% since 2011.

When considering an equity release plan there are various options available to you, including securing a regular income or taking a lump sum payment. Two thirds of customers (66%) surveyed opted for drawdown products, taking regular payments to help with living costs, while 34% chose the lump sum option – perhaps looking to fund a larger one-off purchase.

Customers are also becoming more independent when looking into products, with more than half (54%) using online sites like Moneyfacts.co.uk to do their research; this being more than twice the number that chose to speak to a financial adviser or introducer.

However, when it comes to actually buying the products the use of an independent financial adviser is on the increase with 97% choosing to speak to one in 2013 compared to 55% ten years ago.

With house prices booming, interest rates low and the need for better financial security in later life, there's no better time to look into equity release, but spending the time to conduct thorough research seems to be the key to a happy and healthy financial retirement.

What Next?

Are you looking to unlock a proportion of the value – or equity – you have in your home? Equity Release could be the solution for you

Speak to an adviser directly by simply calling 01737 233462 and quoting MFER04

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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