Equity release was the fastest growing sector of the mortgage market in 2018 and is increasingly becoming an important part of retirement planning for older homeowners.
A report published today revealed lifetime mortgages – the most popular type of equity release – now make up a third of all mortgage products taken out by over-55s in the UK.
Indeed, according to the data released today by the Equity Release Council (ERC), 50p of housing wealth was unlocked during 2018 for every £1 of flexible pension payments.
There has also been a double digit rise in customer numbers in many regions of the UK as demand for equity release soars. The East of England experienced the biggest rise, seeing a 158% increase in the take up of lifetime mortgages in the last five years.
Wider range of products
And, it would appear, as demand increases, so does the choice of products available. Indeed, the ERC reported at the start of 2019 the range of products which met its standards had doubled to 221 in the space of a year.
Customers can now choose from a selection of plans of which over half offer downsizing protection. There was also an increase in products which allowed customers to make regular interest payments, and therefore help to reduce the overall cost of unlocking housing wealth.
A quarter of new plans taken out during the second half of 2018 allowed customer to make interest payments and a similar number featured downsizing payment options. According to the ERC, 87% allowed customers to make voluntary partial repayments with no early repayment charge.
Advice
Although demand for equity release is soaring, the ERC is urging anyone considering releasing their housing wealth to get professional advice before proceeding.
David Burrowes, chairman of the ERC, said as demand grew, so too did the need for quality advice. “It is vital that consumers have access to professional support that considers short and long-term needs, the broader retirement picture and the role in family in decision-making,” he said.
“Products recognised by the council remain the only route which guarantees product safeguards, regulated and qualified financial advice and independent legal counsel to help identify whether they fit a customer’s life needs.
“Equity release is not a ‘silver bullet’ for every retirement need, but a growing number of homeowners are finding it can be a solution to meet a range of financial goals.”
Pension shortfall
According to Chris Knight, chief executive, Legal & General Retail Retirement, the decline of final salary pensions and changes to the way people live during their retirement are among the reasons behind the rise of equity release.
He said a generation of asset-rich, cash poor retirees were using their housing wealth to pay for home improvements or help their children on the property ladder amongst other reasons.
But research by Just Group shows many over-60s are still not confident they are prepared, financially, for their retirement.
Stephen Lowe, group communications director at Just Group: “Home ownership levels, which peak in later life, are a key factor driving financial confidence, most likely because people see an additional pool of wealth that they can tap into in the future if needed.
At the same time the industry is responding with more innovative, flexible and competitive deals to choose from.”
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What Mortgage has teamed up with Equity Release Supermarket to answer your questions on Equity Release.
To read this month’s Q&A or to submit your own query, click here.
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