Is it time for retirees to reconsider their equity release alternatives because their property wealth has increased?
PENSIONERS’ property worth has increased by nearly £2 billion in recent months as equity release prices have risen. According to new data, savers are putting their money to good use, but retirees should think about their alternatives carefully.
From the age of 55, retirees can take advantage of their property values through equity release. Equity release is a term used to describe a group of financial instruments that enable customers to access the equity (or cash) in their homes.
In general, there are two types of equity release schemes: lifetime mortgages and home reversion plans.
In terms of equity release programs, Key, the UK’s foremost equity release adviser, recently published research showing that in 2021, enormous sums of money will be generated.
“As the equity release market maintained its strong recovery, older homeowners earned a £1.94 billion property worth increase in the first half of the year,” Key explained.
“Compared to a year earlier, the number of equity release plans taken out increased by 3% to 20,445 in the six months to June 30, while the total value of fresh stock released increased by 32% from £1.47 billion to £1.94 billion. A further £666 million has been set aside for future usage.
“With customers prioritizing ‘big ticket’ expenses such as mortgage and unsecured debt payments (av. £74,894) and gifts (av. £72,520) above holidays (av. £16,458) and home upgrades (av. £16,907), the average amount of equity customers are releasing has climbed to £94,982 (H1 2021 – £72,340).
“However, with a strong housing market pushing the average home utilized for equity release up 15% in value from £321,209 to £368,883, LTVs have stayed reasonably consistent (26 percent from 23 percent in H1 2020).
“The total value of new equity released in the first half of 2019 before the commencement of COVID-19 was higher at £1.94 billion than the £1.68 billion released in the first half of 2019 before the onset of COVID-19 as the market recovered.”
Key went on to explain how this money is being spent.
More than half (52%) of equity release earnings were utilized to pay off mortgages, manage unsecured debts, and/or assist family and friends.
An average of £74,894 in borrowing was returned and £72,520 was gifted for these “big ticket” expenses.
Over half of those who utilized their equity to help their extended relatives and friends did so to pay for a housing deposit (52 percent) or to start a business. “Brinkwire News in Condensed Form.”