Posted 3 Jul 2020

Why is Equity Release becoming more popular among over 55’s?

The equity release market has been growing steadily in popularity over the past two decades and increasingly in the past few years. The main reason is that more people are reaching retirement with equity in their properties and not enough pension income.

Even though equity release has been available for over 20 years, it’s still something that not many people know about. If you’ve never heard of the term equity release then you’re not alone and it’s something that is becoming more common in the present economic climate.

In basic terms, equity release is also known as a lifetime mortgage which is a loan secured against your home, which only needs to be repaid when you pass away, or move in to permanent care. In recent years the rates for equity release have dropped significantly, this is due to an increase in popularity and a more competitive equity release lending marketplace.

Some of the main developments which have made equity release much more popular are; negative equity guarantees, more flexibility and product options to choose from, and far lower competitive rates. Currently there are also a number of ways to take out an equity release loan to suit each borrowers needs and situation.

Equity release has also become more heavily regulated thanks to the Equity Release Council and Financial Conduct Authority (FCA). Financial advisers are also now required to hold a specific qualification to be able to advise customers about this product. This means that customers are now protected much more than they ever have been in past.

What do people use Equity Release for?

In the current difficult economic climate, many borrowers are using the funds from equity release to help their families by gifting them money. Traditionally the loans have been used for home improvements, or lifestyle choices such as a dream holiday.

Currently we’re seeing an increasing demand from customers who simply want to support their children or families. The Coronavirus pandemic has caused people to have to dramatically review their financial circumstances. Providing financial support to loved ones has been a big talking point.

Why should I consider Equity Release?

You could be able to provide financial support to your family or better fund your retirement without having to downsize or take on extra debt. A lifetime mortgage allows you to release tax-free cash from your home without added stress or expense of moving home or having to make monthly repayments.

People have also been concerned in the past about leaving their family with a debt if they pass away. The modern equity release loans mean that this is not possible and you can also secure a legacy to leave your family as part of their inheritance.

What about if I have an interest-only mortgage and I’m over 55?

There is also a growing situation where around 40% of mortgage borrowers over the age of 55 have an interest-only mortgage which is due to end before 2025, and they have no funds available to repay the debt. This equates to approximately 60,000 home owners over 55 in the UK alone.

Being able to repay that amount without moving home and downsizing has now become possible with equity release. It’s also possible to take out an equity release loan with no monthly repayments, allowing you to enjoy your retirement without the financial worry.

For more information about equity release, call our qualified expert Matthew Jones on 0800 009 6559.

Daniel Sharpe-Szunko