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Conservatories, consolidation and clearing mortgages

Latest data shows why British homeowners are using equity release

The latest figures from retirement income providers Retirement Advantage show funding home and garden improvements and clearing and consolidating existing debts are the most popular reasons for using equity release.

Home improvements were the most common reason given for taking out equity release loans in Q3 according to Retirement Advantage’s customer data, with one in four (25%) taken out to help pay for renovations. One in five (21%) customers taking out equity release loans between July and September cited settling their mortgage as a reason, with nearly one in seven (13%) using it to help consolidate unsecured debts.

Alice Watson, Head of Marketing at Retirement Advantage Equity Release, said:

“There is a groundswell of customers recognising that their property can play just as much a role in their retirement planning as pension income and other assets. Given that for many their property wealth is worth more than their pensions savings, and can be released without losing the ability to pass on its value as inheritance, this kind of holistic thinking is positive and can help ease reliance on pension pots for retirement income.”

The data shows a wide variety of reasons given for using equity release, from buying cars (9%) to funding holidays (12%) to helping first time buyers (3%) to even covering day to day living expenses (12%). Significantly, one in 20 loans are taken out to buy new property that could in turn be eligible for equity release, with products now available covering Buy to Let properties.

Alice Watson added:

“The use of equity release to buy new property is noteworthy, given speculation in recent years that Buy to Let has become a less appealing prospect in light of tax changes. There are now products available that allow landlords with multiple properties to unlock the wealth from their other properties through equity release. These products are unaffected by stringent new regulations on mortgage affordability checks, which could limit the ability of portfolio landlords to refinance their properties.

“Even for those who aren’t considering equity release to purchase new property, these findings are a good reminder of the importance of consulting a financial adviser as a first step in finding out how the wealth stored in their current property can help to support them in retirement.”