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Equity release is growing in popularity as a way to boost retirement income, with many retirees able to benefit from years of house price rises by freeing up some of the cash tied up in their home. New figures from the Equity Release Council show just how many people are taking this option, with lending having hit yet another record high.
The figures show that over-55s withdrew a total of £701 million from their homes between April and June this year, the highest figure in any single quarter on record, as well as marking a rise of 36% compared with a year previously.
A total of 8,454 customers took out new equity release plans, 27% more than the 6,671 new plans recorded in April-June 2016, while there were a further 6,566 returning drawdown customers – those who release cash from their home in instalments, rather than in one lump sum, to reduce the build-up of interest – an increase of 9% from the previous three-month period.
This shows that housing wealth is steadily becoming more established as an option for retirement planning, as more and more people look to put the cash tied up in their home to better use – and many are looking to use it to help fund their post-work years.
The figures went on to reveal that drawdown lifetime mortgages remain the most popular product type, with 68% of new customers opting for drawdown during the quarter. It also accounted for 63% of total lending in value terms, while lump sum products – whereby the full amount to be released is accessed from the outset – accounted for 32% of new plans agreed and 37% of total lending.
The value of both kinds of lending grew substantially over the year, arguably thanks to a combination of house price rises and the growing number of customers: the value of lump sum lending rose by 25% year-on-year to total £262 million, while drawdown lending jumped up by 44% to £438 million.
"Continued rapid growth in housing wealth withdrawals reflects an increasing appetite among older consumers to utilise bricks and mortar for funding retirements," said Nigel Waterson, chairman of the Equity Release Council.
"The retirement income pressures facing many savers in the era of defined contribution pensions and low interest rates are encouraging homeowners to consider a wider range of financial options. Housing wealth – often people's most valuable asset – is an important part of bridging the gap between the comfortable retirement people want and the retirement they can afford from their savings."
If you've got a large amount of equity in your home and want to free up some of that cash without needing to downsize, equity release could well be an option. It could be a great way to help you boost your retirement income – particularly as many people are realising their pension savings may not go that far – or you may have other ideas in mind, such as using it for home improvements or to help younger family members get onto the ladder.
Of course, it won't be right for everyone – it'll reduce the amount you'll be able to pass on to loved ones, and you'll need to consider the amount of interest that could be accrued over the years – but for some it can be a valuable lifeline. This is why it's vital to understand more about what equity release is before you dive in. Start the process by reading our guide, or contact our no obligation equity release advice service to find out more.
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