An increasing number of people aged 65 and over are unlocking money tied up in their homes and using equity release in order to pay down debts and mortgages, according to new findings by insurance provider LV=.
As recently as 2016, 32 per cent of those aged 65 and over were mostly using equity release to finance home and garden improvements, but in 2019, this figure fell to 24 per cent, while 27 per cent were using the money to help clear debts, loans or mortgages instead.
People of pensionable age were also increasingly using equity release to help family and friends, suggesting that the money can be put to even more uses elsewhere.
An increasingly popular choice
The findings from LV= echo figures released by the Equity Release Council in October 2019, which suggested that activity had shown a marked increase in the third quarter of the year, with equity release products reaching a total value of £988 million, up eight per cent from £911 million in the second quarter.
The UK’s ageing population is cited as a likely cause of the move towards increased equity release activity, with 50 per cent of homeowners aged 45 and over saying that property wealth had a part to play in their later life plans.
With the population of those aged 70 and over expected to rise from nine million in 2019 to as many as 13 million by 2039, the trend is likely to become even more commonplace, as 70 is the average age at which Brits begin to take a drawdown lifetime mortgage – one of the most popular products at their disposal.
Rising life expectancy puts pressure on pensioners to ensure that their pension incomes can sustain their standard of living, with many looking for solutions to ensure that they continue to have adequate cashflow.
Added security for homeowners
One of the benefits of using equity release is that it helps consumers pay down debts they may have incurred over the years, if they find themselves in a position where pension incomes simply won’t cover it.
Georgina Oxton, strategic sales manager at LV=, explained: “For customers with interest-only mortgages having no means of repaying them, equity release would be one option, as people have the added security of still living in their home until they die or go into long-term care.”
Reflecting on the fact that an increasing number of people were also using equity release to help out loved ones and friends, Ms Oxton added: “Helping grandchildren with deposits for their first home or the costs of higher education are just some of the reasons why an increasing number of our customers use equity release to help friends and families.”
One of LV=’s other major discoveries from their survey on equity release revealed that it was a popular idea especially for women for a wide variety of reasons. This includes the fact that women tend to live longer than men, earn lower wages than them and more women aged 60 and over are separated and divorced than ever before.