Equity Release Industry Now Worth £3 Billion

The equity release industry broke through the £3 billion barrier in 2017, with over 37,000 new customers signing up to remove equity from their home. Homeowners over 55 years old are able to release up to 35% of the value of their property and receive the funds in one lump sum which is tax free.

The main benefit is that families can continue to stay in their existing home which the lender receives a stake in and is able to recover their funds when the homeowner dies or moves into full time care. The remaining sums are passed onto their children or next of kin of the homeowners in the form of inheritance.

What has fuelled the increase in demand for equity release?

The increased costs of living and ageing population have spurred the equity release industry. Whereby seniors had previously saved a certain amount and relied on their pensions, this may no longer be sufficient to maintain a high standard of living in the UK today. Furthermore, the rise in competition in the industry and the use of TV and radio has made the product more mainstream and more competitive products available for customers.

How much did households release from their home?

The average household that used equity release in the final quarter of 2017 withdrew around £62,539 from their home, an increase from £59,002 in the previous quarter.

Commonly referred to as lifetime mortgages, the financial product assumes that you will continue to live in your estate for the rest of your life. Lifetime mortgages have flexible options allowing you to release all the money you require upfront or via instalments to give you a regular income. You also have the choice over whether you want to make full or partial repayments or if you want the product to run until you die.

A full reversion plan is another option allowing homeowners to receive 20% to 60% of the property’s value but giving up the homeownership status of your property but living in the premises as a tenant.

This is considered a much riskier option for applicants because the house will be appraised under the market value and will typically limit the amount of inheritance that you pass onto your children. Hence, it is better suited to those homes that need more money upfront and are less interested in what they leave behind.

What do homeowners use equity release for?

Data from Access Equity Release shows that senior citizens use equity release for a number of reasons. Some use the product as a replacement for a pension or to secure a regular income following the increase in the costs of living.

Elsewhere, there is a demand for funding home improvements and refurbishments to make their property friendlier for senior-living.

Family-oriented residents have opted for equity release as a way to pass on money to their children, including paying for tuition, weddings and helping their offspring with their first deposits and to get on the property ladder.