Using equity release to clear an existing mortgage is most popular reason for lifetime mortgage applications, new research shows.
A study by Stonehaven, the lifetime mortgage specialist, found clearing an existing mortgage was the most common reason for over 55s to use equity release.
Thirty-eight per cent of the company’s customers who applied for a lifetime mortgage in the last three months did so for this reason.
Other popular reasons included making home and garden improvements with 30 per cent of customers using the loan to improve their current home.
Consolidating unsecured debt and simplifying finances was the reason for 28 per cent of borrowers, while 19 per cent were using the product to gift to relatives.
The research also showed 20 per cent of customers were using the mortgage to buy a new property as homeowners choose to ‘upsize’ to a new home or move closer to town centres.
Many mainstream lenders restrict their lending criteria for those in, or approaching, retirement, which has led to the uptake in those using lifetime mortgages.
Some of the more unusual reasons for taking out a lifetime mortgage included using the money to help foot the bill for weddings and divorces as well as business investments.
Others opted to indulge in life’s luxuries such as a car, caravan, motorbike or a boat or used the equity to enjoy the holiday of a lifetime.
Alice Watson, product and communications manager at Stonehaven, says: “The lifetime mortgage market has evolved considerably, reflecting the changing needs and aspirations of retirees.
“An increasing number of our customers are applying for lifetime mortgages to clear their existing mortgage as it offers a sensible solution to the interest-only time bomb for those who do not have a repayment vehicle in place.”
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