Equity release surges in popularity

Share

A surge in homeowners looking to free up cash from their properties propelled the figure for equity release to £1.05bn in the three months to the end of September, driven by high house prices, gifts to family members and uncertainty induced by the coronavirus pandemic.

The value of equity released jumped by nearly one-fifth from £884m in the third quarter of 2020. While the number of loans taken out was slightly down year on year, the average amount of housing wealth freed up was 23% higher, at £101,593 per borrower.

Data published this month by equity release provider Key, suggested many borrowers were taking advantage of recent house price gains to help family members climb the housing ladder. “Big-ticket items” such as debt management and gifting were behind nearly two-thirds of the equity released in the third quarter, Key said. More than two-fifths (42%) of the cash given to family and friends was used for house deposits.

For homeowners over the age of 55, equity release offers a way of unlocking the value of their properties, whether for home improvements, paying off other debts or to help family members. Interest on the loan is paid through the sale of the house at the end of the term so, unlike a conventional mortgage, a borrower is not required to demonstrate a minimum level of income to qualify.

Interest rates are higher for these “lifetime mortgages” than for most mainstream mortgages. Key said rates on equity release were still “significantly under those recorded historically” but had crept up from a low of 2.8% in the last quarter of 2020 to 3.16% in the latest three-month period. Those who use equity release at a younger age risk accumulating a much higher interest bill when the moment comes to sell up, so many advisers recommend people hold off for as long as they can before taking out a loan. Key’s research found 49% of borrowers in the latest quarter were aged between 65 and 74.

If you would like advice on releasing equity from your property, please reach out to your financial planner here.

Articles on this website are offered only for general information and educational purposes. They are not offered as, and do not constitute, financial advice. You should not act or rely on any information contained in this website without first seeking advice from a professional.

Past performance is not a guide to future performance and may not be repeated. Capital is at risk; investments and the income from them can fall as well as rise and investors may not get back the amounts originally invested.

Your home may be repossessed if you do not keep up with payments on your mortgage.

You are now departing from the regulatory site of Finura. Finura is not responsible for the accuracy of the information contained within the linked site.

Sources: Techlink

Share

Other News

Tax Year End Planning Checklist For Individuals – 2023/24 Tax Year

As tax year end approaches, there is still time to make use of your available reliefs and allowances.

This tax year end planning checklist covers the main planning opportunities available to UK resident individuals and will hopefully help to inspire action to reduce tax for the 2023/24 tax year and to plan ahead for 2024/25.

Higher Rate Taxpaying Is A Growing Club

As tax rate band thresholds are changing, understanding the impact on high rate taxpayers and the economy is crucial.

5 Top Tips To Boost Your Pension Savings

It was recently revealed in the media that the amount we need to enjoy a ‘moderate’ retirement has increased by £8,000 per annum, a 38% increase, in just one year.