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12 Jul 2017

Equity release increasingly used for home improvements and to help younger generations

Older people are using equity release to future-proof their homes and improve the lifestyle of themselves and their families, according to research by the Saga Equity Release Advice Service.

Market data from the Equity Release Council shows that growing numbers of people are freeing up some of the cash held in their home, with equity release sales increasing by 30% in the last year.

And according to Saga´s analysis, the way people choose to use this money has changed significantly over the last five years.

Home improvement has been the main reason people choose to withdraw the equity in their property since 2012, and the proportion of people using some of the money they release for this purpose has increased by 10% over this period, the company found.

“Whether it is for new kitchens or bathrooms, to carry out essential maintenance or adapt their home so it is suitable for them throughout their later life, two thirds of people spend the money on their home, typically spending over £13,000,” Saga revealed.

Older generations are also passing on the wealth they have built up in their home to help out younger generations of their family with big expenses like housing deposits and wedding costs. The amount people give to family has increased by over a quarter since 2012 and now typically stands at £33,000.

Fewer people are setting aside equity release funds for unplanned spending, however. While having an emergency fund was a key reason 40% of people tapped into their housing wealth five years ago, just 25% give this as one of the reasons they used equity release last year, with people on average reserving £3,600 for a rainy day. But as Saga noted, this could largely be down to the increasing popularity of draw-down plans, which allow people to take money as and when they need it rather than incurring interest on the full amount when they first take out a plan.

Commenting on the findings, Gloria Barker, head of products at Saga, said: “Our research demonstrates that equity release is increasingly being considered as a mainstream solution future-proofing their homes and income for later life — making them less dependent on the state. That´s a big change from the traditional perception that it is limited to those who find it hard to make ends meet.

“While people are beginning to see their house as an asset to fund later life rather than something for their family to inherit, this does not mean that they are not prepared to help family out financially. By far one the biggest chunks of money they withdraw is to gift to their relatives, showing that they are keen to pass their wealth on down the generations.”

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