The amount of money spent by homeowners on home improvements after releasing equity in their property has gone up by a third in the past five years, according to new analysis.
Saga Equity Release Advice Service said that home improvement has been the main reason people choose to withdraw the equity in their property since 2012, going up by 10% over this period.
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 over £13,000.
In the past year alone equity release sales have surged by 30%, showing how older people are becoming increasingly comfortable with using the equity they have built up in their homes to improve their lifestyle and those of their families.
Older generations are keen to pass on the wealth they have built up in their home to give gifts to younger generations of their family. Often for housing deposits or to cover wedding costs or education for their grandchildren, the amount people have gifted to family has increased by over a quarter since 2012 and now typically stands at £33,000.
Having an emergency fund is an important security blanket for those on a fixed income later in life, but while this was another key reason 40% of people took money through equity release five years ago, people now are much less likely to use their housing wealth to cover unplanned spending.
Just 25% give this as one of the reasons they used equity release last year, with people on average taking £3,600 to keep aside for a rainy day.
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.
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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