Why are people releasing equity from their homes?

Why are people releasing equity from their homes?

Canada Life customer data has revealed that 50% of applications in H1 were from customers looking to clear their existing mortgage, the most common reason given for releasing some or all of the equity. This was followed by raising money to pay for home improvements (38%) and supporting day-to-day living costs (20%).

Gifting to family or friends was also a popular reason, with 15% choosing to release equity for this purpose. Customers also continued to use equity release to make substantial one-off purchases such as booking a holiday (14%), buying a new property (12%), or buying a car (10%).

Alice Watson, head of marketing, insurance at Canada Life said that “surging inflation” and the “rising cost of living” were also contributing factors into their customers releasing equity. She continued:

“From the first six months of the year we can see that the desire to clear an existing mortgage is a strong driver to pursuing equity release. We then can’t ignore the significant proportion of people turning to equity release in order to cover their daily living expenses, the demand likely being driven by the current cost of living crisis. Despite this, customers are also still keen to make home improvements, go on holidays and gift to friends and family.

All of this simply highlights the flexibility and accessibility of modern equity release products allowing families the ability to enjoy their retirements comfortably in a way that suits them. However, equity release is a lifelong financial decision, so it is essential that people seek financial advice and talk through their decision with loved ones before agreeing to a product.”

Previous research by mortgage broker, Henry Dannell showed that utilising equity release via Later Life mortgages can supplement homeowners income by a fifth. This research showed that equity release is an increasingly popular method for those aged 55 and over when it comes to supplementing their lifestyles by boosting pension pots by as much as 181%.

These figures follow statistics released by the Equity Release Council, who recently revealed that a striking £1.6 billion of property wealth was withdrawn via equity release in Q2 2022. The Council also reported that homeowners aged 55+ took out 12,485 new equity release plans between April and June 2022, which is the equivalent of 205 per day.

Joseph Mullane

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