According to new data, the number of people using equity release is expected to break a new record this year, as older property owners struggle with the rising cost of living.
More than 150,000 homeowners have used equity release as a way to get cash in the last two years, according to figures from the Equity Release Council.
Despite the fact that equity release borrowings were down during the coronavirus pandemic, they increased by 21% in the first three months of 2022, compared to a 9% decrease during the same period the previous year.
The increase in borrowings has in part been led by the fact that property prices are rising and more money can be withdrawn. People using an equity release calculator will have found that the figures for 2022 would have been much higher than 2021.
The number of new and continuing equity release customers rose to a new quarterly high of 23,395 during the first three months of 2022. Total quarterly lending reached £1.53bn between January and March, up from £1.34bn during the last three months of 2021.
The rising popularity of equity release in 2022, according to David Burrowes, Chair of the Equity Release Council, is simply a consequence of contemporary products allowing for increased flexibility and a property market where growth has outpaced inflation, alongside an ageing population.
David said: “After two years where customer numbers have been subdued by the pandemic, realising gains from rising house prices can make a major difference to people’s quality of life.
Not only are more people considering equity release, but they are doing so for many different reasons and helping old and young alike to fund everyday costs and major life events.
Innovation has made equity release products more adaptable to customers’ changing circumstances. Our standards mean lifetime mortgages remain the most secure type of retirement home finance, with customers protected from interest rate rises, repossession and passing on debt due to negative equity.
However, it remains vital that decisions are carefully considered through both a long-term and short-term lens, with family input wherever possible, and with financial and legal advice in every instance.”
Many commentators have predicted that equity release borrowings would “skyrocket” over the coming months, because of the cost-of-living crisis.
You are likely to see Older owners, often property rich and cash poor, are releasing funds to cover increased living expenses such as council tax and heating in rising numbers.”
Why is equity release popular?
There are a number of reasons for the growing popularity of equity release. Firstly, it is now possible to ring-fence some of the value of your property so that you can keep some inheritance for your children or grandchildren.
This was not always the case and in the past, many people were reluctant to consider equity release because they were worried about leaving their loved ones with nothing.
Secondly, the products on offer have become much more flexible in recent years. It is now possible to take advantage of drawdown schemes, which allow you to release funds gradually as and when you need them.
This is a much more attractive proposition for many people than having to downsize to a smaller property in order to free up cash.
Finally, it is worth considering equity release if you are struggling to keep up with the rising cost of living. With interest rates remaining at historic lows, the returns on offer from savings accounts are simply not enough to keep pace with inflation.