The most common reason people took out equity release in 2021 was to clear an existing mortgage, new data from Canada Life has revealed.
The equity release lender said almost half (46%) the applications it received last year were from customers who wished to clear the remainder of their mortgage, with a further 34% using the money to fund home improvements.
The analysis of Canada Life’s applications also found 19% of customers wanted to release equity to fund day-to-day living costs. This is the first time this reason has entered the top three in Canada Life’s analysis.
Alice Watson, head of marketing, insurance at Canada Life, said: “We can see that the desire to wave goodbye to mortgage payments continues to be a strong motivator to freeing up equity from a property.
“We’ve also seen a steady rise in people turning to equity release in order to cover their daily living expenses, the demand likely being driven by the current cost of living crisis.
“The variety of reasons given for releasing equity highlight the flexibility and accessibility of modern products allowing families the ability to enjoy their retirements comfortably in a way that suits them.
“However, equity release is a lifelong financial decision, so it is essential that people seek financial advice and talk through their decision with loved ones before agreeing to a product.”
Customers also continued to use equity release to make substantial one-off purchases such as buying a new property (15%), booking a holiday (12%) or buying a car (11%), the analysis revealed.
Canada Life’s top three ‘reasons for loan’
| Year | Reason #1 | Reason #2 | Reason #3 | |||
| 2021 | Clear existing mortgage | 46% | Home improvements for extra value/enjoyment | 34% | Day-to-day living costs | 19% |
| 2020 | Clear existing mortgage | 45% | Home improvements for extra value/enjoyment | 37% | Debt consolidation | 24% |
| 2019 | Clear existing mortgage | 46% | Home improvements for extra value/enjoyment | 40% | Debt consolidation | 24% |
| 2018 | Clear existing mortgage | 38% | Debt consolidation | 26% | Home improvements for extra value/enjoyment | 19% |
| 2017 | Home and/or garden improvements | 30% | Clear existing mortgage | 27% | Debt consolidation | 18% |
Source: Canada Life
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