Published: 23/05/2019

Equity release can be a great way for older homeowners to give their retirement income a boost, allowing them to release cash tied up in their home without needing to downsize. But just what are these later life borrowers doing with all that extra money? Well, even though many use it to fund home improvements, holidays or simply to enjoy a comfortable standard of living, research from Key shows that many are also using their housing wealth to clear debts.

Becoming debt-free

The figures show that the number of customers using equity release to pay off loans and credit cards hit a three-year high of 35% in the first three months of the year, up from 30% a year previously. Another 28% used the funds to clear outstanding mortgages – up from 21% – which means that, overall, the number of customers using property wealth to clear their outstanding debts is the highest seen since 2016, and the third-highest on record.

“The current challenging economic environment has seen a move away from holidays and home improvements to people tackling pressing immediate issues such as paying off debt,” said Will Hale, CEO at Key. “Nearing or entering retirement with an income that might be exceeded or matched by debt repayments can be hugely stressful and may mean people need to make fundamental changes to their plans such as working longer. 

“However, this will not solve everyone’s issues and is not even viable for some, so looking into downsizing, equity release or other later life lending options might be the right answer. Not only will making sensible choices around property mean that people are less stressed but it will help to set them up for a more comfortable retirement in the future.”

Equity release boost

Equity release as a whole is booming as well, with new lending rising to £839.58m in the first three months of the year, as well as £340.42m in new potential drawdown facilities also being arranged (equity release customers typically get the option of taking the full amount of equity released in a single lump sum, or “drawing down” from their home’s wealth when they need it). This means that the total value of the market stood at £1.18bn during the quarter, up from £1.03bn a year previously, suggesting that new records could be broken by the end of the year.

Customers released an average £75,032 during the three-month period, and although many used some (or all) of that money to clear debts, the most popular use of equity release continues to be paying for home and garden improvements (60%) as they future-proof their home for retirement. Another 31% used some or all of the money to pay for holidays, while 30% opted to help family, with an increasingly popular use of equity release being to help younger generations get on the housing ladder.

“Typically the equity release market has a quieter start to the year but the latest Q1 results suggest that we should see continued growth in 2019,” added Will Hale. “Good independent expert advice is key to ensuring that older homeowners receive the most benefit from their property wealth and use it in the most appropriate way for them and their families.”

What next?

Considering equity release to fund your retirement, clear debts, help family members or improve your home? You’ll need the right advice to suit. Find out more about equity release here, or if you’re ready to take things forward and see what your options might be, contact our no-obligation equity release advice service.

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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