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Three in five homeowners considering equity release in retirement

A toy house on top of a pile of coins

A growing number of older homeowners are interested in releasing money from their property in later life to meet various financial needs.

Research by the Equity Release Council shows that more than three in five (61%) UK homeowners -- equivalent to 18.7 million people -- would consider some form of equity release, tapping into the value of their home to support spending during their retirement. This is an increase from 57% of people who said the same in 2021.

Types of equity release

Equity release is designed for homeowners who are aged 55 and over. There are two main types:

  • Lifetime mortgage. The most common form of equity release. You borrow money secured against your home, and this is usually repaid from the sale of your home when you die or move permanently into residential care.
  • Home reversion plan. You sell all or part of your property while continuing to live in it until you die or move into long-term residential care.

New customers are increasingly opting for drawdown lifetime mortgages, which allow the homeowner to take several smaller withdrawals rather than one lump sum. Such flexibility makes it possible to hold funds back for future needs and benefit from future rate cuts, as each withdrawal is charged at the prevailing rate at the time.

Care-related costs

The survey of 5,000 UK adults, supported by Equity Release Supermarket, shows how attitudes towards borrowing into retirement are changing. Homeowners increasingly believe it is becoming more common (39%) and acceptable (39%) to have a mortgage in later life, both up from 34% in 2021. Only 26% rule out the idea of accessing money from their homes when they are older.

Almost half (46%) of homeowners aged 55 and over now see property wealth as a means of satisfying later life needs. And three in four (75%) of those below the age of 55 are open to drawing on their property wealth in later life.

The biggest drivers for doing so are to meet care-related costs (17%), boost pension income (16%) and fund travel plans (15%).

Supporting the financial wellbeing of younger family members is also an important priority, the Equity Release Council found. One in seven (14%) are interested in 'giving while living' by gifting money from their property wealth to family for a deposit towards their first home, while another 13% are looking to gift money to younger relatives to support other financial goals.

Longer life expectancy

"At one time people thought their mortgages would run just for the mandated term, but changing attitudes and acceptance towards borrowing into retirement has created ongoing demand for these types of products," said Mark Gregory, founder and CEO of Equity Release Supermarket.

"This coupled with a decline in pension provisions, savings and longer life expectancy has given rise to a need to borrow in later life as people look to redistribute their wealth to the younger generation, pay for care, replace their mortgage or fund lifestyle goals.

"The equity release sector has significantly evolved in line with these consumer demands and now encompasses far greater opportunities around later life living and finance."

Posted by Fidelius on May 28th 2024

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