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2018 proved to be another record year for the equity release sector, with latest figures revealing that retired homeowners released £3.6bn in property wealth over the year, the highest annual total ever seen – and by all accounts, 2019 could go even better!
The figures, from equity release adviser Key, reveal that the market has doubled in size in just three years, rising from £1.71bn of lending in 2015 to 2018's £3.6bn, which also marks a rise of £586m from 2017 (when the total stood at £3.01bn). And this isn't even the full story – when further advances and additional drawdowns are factored into the equation, the annual figure for last year is closer to £4bn.
Breaking it down further shows that homes paid out almost £10m every single day in 2018, with customers releasing an average of £76,500 each. Overall, the number of plan sales rose by 21% year-on-year – with drawdown plans continuing to account for the majority of sales (64%), while lifetime mortgages accounted for 36% of all plans – and the value of funds released rose by 19%, giving retired homeowners plenty of scope to improve their standard of living. But what did they spend the money on?
Gifting some of the money to friends and family is proving to be a growing use of released funds. Indeed, the number of customers gifting money rose from 24% to 27% over the year, with the money typically being used to clear debts, pay for life events such as house deposits, university fees or weddings, or even to pay for things like cars and family holidays.
However, the most popular use continues to be funding home or garden improvements, with over two-thirds (64%) re-investing some or all of the money into their houses. Another 33% paid for holidays, while others focused on clearing debt, with 31% using some or all the cash to clear credit cards or loans and 22% paying off existing mortgages.
"The equity release market recorded another strong year of growth [and] has doubled in size in three years, demonstrating how important it is to retirement planning," said
Will Hale, CEO at Key. "The growth in gifting highlights the intergenerational benefits of equity release for families … Even the use of equity release to fund home and garden improvements has benefits as it helps people to 'age-proof' their home and preserve wealth for the family.
"Debt remains however a major issue for some retired people and substantial numbers are relying on equity release to clear credit cards and loans as well as paying off mortgages. Good specialist 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."
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