The number of over-55s using equity release to unlock cash in their homes has surged in the past year, driven by increased competition and innovation, a new report has revealed.
According to figures from the Equity Release Council, 21,490 new equity release plans were taken out in the first half of the year, up 28% from 16,805 in 2017.
This growth has been driven in part by innovation across the later life lending market, following a rise in the number of product options available, the Equity Release Council says.
The number of equity release products available has more than doubled in the past two years, up from 58 in 2016 to 139 in August 2018.
The Equity Release Council says that this increased competition in the market has also helped to drive down the interest rate in the sector from 5.96% in July 2016 to 5.22% in July 2018, making equity release more attractive for homeowners.
The report says more flexible products are increasingly allowing more people to tap into their housing wealth.
For example, four in five equity release products now allow consumers the choice to make ad-hoc, penalty-free voluntary or partial repayments of their loan, up from 68% a year ago, while lifetime mortgages now include the option to ringfence equity. This means homeowners can retain some of the value of their property as a guaranteed minimum inheritance.
David Burrowes, chairman of the Equity Release Council, says: “As customers navigate their way through a growing range of product choices – including retirement interest-only mortgages – the appropriate advice, guidance and support is needed to weigh up the various benefits, costs, flexibilities and protections to ensure they are suitable to meet both current and future needs.
“Industry and regulators must continue to work to ensure customers are aware of all the options available to them when deciding how best to support themselves and their families in later life, taking all their assets – including pensions, savings, investments and property – into consideration.”
You can use equity release to gain access to the wealth tied up in your property without having to sell or move home. It is designed for older homeowners who own their property outright or have relatively small mortgages to pay.
More and more older homeowners are looking to unlock their property wealth to boost their retirement income or enhance their quality of life.
Equity release has seen in rise in popularity in recent years, especially amongst pensioners who are struggling with expenses.
With equity release it is possible to borrow against the value of your home, sell it or part-exchange it for a lump sum or a regular monthly income.
A lifetime mortgage is a long-term loan which you can use to extract your funds in a single lump sum or in smaller amounts over time through what is known as drawdown. Home reversion plans allow you to access all or part of the value of your property while retaining the right to remain in it rent free.
Alice Watson, head of product and marketing at Retirement Advantage Equity Release, says: “More and more, equity release is becoming a norm – and the staggering innovation that we have seen in recent years has played a major part in driving that. The product development which has come to market has helped to open equity release up to a wider pool of customers whose needs weren’t tailored to before.”
She adds: “Homeowners are becoming increasingly familiar and comfortable with equity release and the potential benefits it can bring. We’re seeing a marked shift towards a holistic approach to retirement planning, with property wealth being considered alongside pension pots, investments and other assets. This bodes well for the market continuing its strong growth.”