There has been a 30% increase in equity release sales over the past twelve months, according to new analysis by Saga.
The analysis also found that there have been significant changes over the past five years in how people are choosing to use the money they release.
Money Used for Home Improvements
Home improvement has been the main reason people choose to withdraw the equity in their property since 2012, perhaps fuelled by a desire for people to stay in their own home for as long as possible. The proportion of people using the some of the money they release for this purpose has increased by 10% over this period. Whether it is for new kitchens or bathrooms, to carry out essential maintenance or adapt their home so it is suitable for them throughout their later life, two thirds of people spend the money on their home, typically spending over £13,000.
Older generations also appear to be keen to pass on the wealth they have built up in their home to give gifts to younger generations of their family, often for housing deposits or to cover wedding costs or education for their grandchildren. The amount people have gifted to family has increased by over a quarter since 2012 and now typically stands at £33,000.
Saving for a Rainy Day
Having an emergency fund is an important security blanket for those on a fixed income later in life, but while this was another key reason 40% of people took money through equity release five years ago, people now are much less likely to use their housing wealth to cover unplanned spending.
Just 25% give this as one of the reasons they used equity release last year, with people on average taking £3,600 to keep aside for a rainy day. This could largely be down to the increasing popularity of draw-down plans, which allow people to take money as and when they need it rather than incurring interest on the full amount when they first take out a plan.
“Our research demonstrates that equity release is increasingly being considered as a mainstream solution for future proofing their homes and income for later life – making them less dependent on the state,” explained Gloria Barker, head of products at Saga. “That’s a big change from the traditional perception that it is limited to those who find it hard to make ends meet.”
“While people are beginning to see their house as an asset to fund later life rather than something for their family to inherit, this does not mean that they are not prepared to help family out financially,” she added. “By far one the biggest chunks of money they withdraw is to gift to their relatives, showing that they are keen to pass their wealth on down the generations.”
Equity Release Council Figures
The latest figures from the Equity Release Council, the industry body for the sector, have also revealed a sharp rise in equity release take-up.
According to the figures, the total value of equity release lending reached £701m in the second quarter of this year, reports the FT Adviser. This is apparently the highest quarterly figure recorded since 2002 and is an increase of over a third compared to the same quarter of the previous year.
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