The equity release industry in the UK is worth an estimated £6 billion, according to research by Key. This illustrates a significant increase in number of equity release plans taken out, following market valuations of £3.6 billion in 2018 and £3.01 billion in 2017.
Equity release has become an increasingly popular option for senior homeowners to release equity from their homes for purposes such as home improvements, debt consolidation, supplementing their pension and gifting to their children and grandchildren.
With a constant rise in the living costs in London and other main areas, in conjunction with the ageing UK population, the need for supplementary income becomes manifest. Through equity release plans, those over the age of 55 not only receive a hefty lump sum but also get to remain in their homes until they die or go into long-term care.
Equity release products have become more mainstream and featured in the TV and press, with more than 100 types of equity release plans now available to choose from including different drawdown options, voluntary and partial repayment options too.
Whilst this form of cash release might have seemed taboo and only offered by select mortgage providers, it has blossomed into a competitive industry with a number of new lenders.
Yes, since 2018, the equity release sector is fully regulated by the Financial Conduct Authority in the UK. Prior to FCA regulation, many lenders signed up to Equity Release Council (ERC) formerly known as Safe Home Income Plans (SHIP), which was a voluntary code of conduct that providers had to adhere to.
To read more on how equity release is regulated, please visit this page.
Whilst the most popular age group for taking out a lifetime mortgage is 70-74 (29%) the number of borrowers aged 55 to 69 increased to 42% in 2018, up from 36% the year before.
In 2018, drawdown plans made up over 64% of all sales, whereby customers will receive an initial draw down and can continue to top up when they need to and only pay interest on what they use.
In total, £1.46 billion was lent out in enhanced drawdowns which are specifically for those with lifestyle or health conditions.
Funding home and garden improvements: The most popular use of equity release products last year was to help finance home and garden improvements. In the report conducted by adviser Key, over 64% surveyed said they had used the injection of finance to re-invest it into their properties.
In a number of cases, this was to make the property more adapted to senior living and implementing things like stair-lifts, ramps and easy-access washroom facilities to avoid having to move into care homes in later life.
Debt consolidation: Many households used equity release in 2019 to clear debts or pay off their existing mortgages. In the survey, 31% stated that they had released equity in their home to clear credit cards or outstanding loans into one single repayment, whilst 22% used the money in order to pay off an existing mortgage payments.
Gifting and helping family: The survey showed that 27% of equity release customers used the funds to aid their family members, for things like university fees, getting on the housing ladder, weddings and new cars. This was an increase of 3% from the year before.