Hundreds of homeowners a day taking out equity release plans in 2022

Lifetime mortgages make up the vast amount of equity release plans taken out by homeowners, and these plans can be incredibly helpful in the right circumstances. For example, the funds can be used to pay off debts with high interest rates, or simply to boost retirement income when living costs are soaring.

Experts say that the growth of the equity release market may partly be attributed to the rising cost of living and the current economic climate. With inflation climbing to record highs, soaring energy bills and rising mortgage rates, homeowners may be taking lump sums of equity to meet essential costs. Recent data by equity release advice firm Key, for example, shows that 40% of equity release customers used some or all of their funds to repay an outstanding mortgage.

Steve Wilkie, Executive Chairman at mortgage broker Responsible Life, said: “As bills rise and interest rates climb, later-life borrowers have released more equity than ever.

“There is huge uncertainty for retirees. Eye-watering rises in the energy price cap continue to focus minds. Homeowners are preparing for what is set to be a once-in-a-generation squeeze on disposable incomes early next year.”

Experts warn that taking money out of your property can have a number of implications for tax, benefits, inheritances and long-term financial planning. Equity release products come with risk and won’t be suitable for everyone. Current rules from the financial services regulator the Financial Conduct Authority (FCA) require you to speak to a qualified financial adviser before you are able to take out an equity release product to ensure it’s suitable for your circumstances.

The main risk is that you or your estate could end up paying back a lot more than you borrowed, as interest charges mount up over time, with interest charged both on the original sum and the interest added over time. This is known as compounding. Read more in our article Equity release – what are the risks?.

However, equity release can be the right solution for some to meet living costs. There are plenty of other reasons for releasing a lump sum of equity using a lifetime mortgage, such as wanting to help out relatives who are short on cash, or help children climb onto the property ladder.

Stuart Lewis, Chief Executive Officer at Rest Less, said: “From an emotional perspective, the pandemic has made people reflect on what they want from life. People see their kids struggling to get on the property ladder and how hard the pandemic has been for many of them, so they are looking for ways to transfer wealth while they are still young enough to benefit from it.” Read more in our articles Can I take money out of my property to give to my children? and 8 questions to ask yourself if you’re considering equity release.

Author: wpadmin

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