Unlocking cash from the value of your home

Homeowners release a record-breaking £4.4bn in property wealth

Despite the pandemic, 2021 saw older homeowners release a record-breaking £4.4bn in property wealth at a rate of more than £12m a day to help family members and secure their own finances by repaying debt or remortgaging existing borrowing, according to newly released data[1].

If you’re a homeowner aged 55 and over and looking for ways to release some tax-free funds in your later life, perhaps to fulfil some long-held dreams, or to renovate your home, equity release might be for you. You should always obtain expert advice before you can go ahead with equity release.

Lifetime mortgage – This is the most common type of equity release. You borrow money secured against your home. The mortgage is usually repaid from the sale of your home when you die or move permanently into residential care.

Home reversion plan – You raise money by selling all or part of your home while continuing to live in it until you die or move into permanent residential care.

Increased flexibility 

Around one in five equity release plans (19%) taken out in 2021 was used to support family while two in five (38%) were used to repay residential mortgages or remortgage existing equity release borrowing. This trend has developed as some people realised how they could benefit from lower rates and increased flexibility offered by modern products.

Focused on supporting wider families and managing debt, some over-55s released an average £104,792 worth of housing equity via equity release during 2021 – an increase of 23% on the previous year and 37% higher than 2019 before the pandemic started.

Debt repayment

Remortgaging became much more prevalent in 2021. An average balance moved was £135,529 from an interest rate of 5.1% to 3.6% and the volume of cases accounted for 22% of all equity released used for debt repayment.

The number of people using property wealth to pay off mortgages nearly doubled from 20% in 2020 to 38% last year, and the numbers using it to pay off unsecured debt remained steady at around 27%.

New features

The growth in the amount used to repay mortgages was driven in part by the significant uplift in the number of people remortgaging equity release plans to access new features, improve interest rates and increase borrowing.

However, the amount of money used to pay unsecured debt dropped from 18% to just 6%, suggesting older homeowners were able to use their incomes to pay off debts as COVID-19 restrictions impacted on spending. Spending on holidays continued to fall from 23% in 2020 to just 7%.

Is it right for me? 

Understanding the features and risks of equity release can be complicated. It’s essential to obtain professional advice from a fully qualified and experienced equity release adviser.

THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR MORTGAGE IS SECURED ON YOUR HOME, WHICH YOU COULD LOSE IF YOU DO NOT KEEP UP YOUR MORTGAGE PAYMENTS. 

EQUITY RELEASE MAY INVOLVE A HOME REVERSION PLAN OR LIFETIME MORTGAGE WHICH IS SECURED AGAINST YOUR PROPERTY. TO UNDERSTAND THE FEATURES AND RISKS, ASK FOR A PERSONALISED ILLUSTRATION.

EQUITY RELEASE REQUIRES PAYING OFF ANY OUTSTANDING MORTGAGE. EQUITY RELEASED, PLUS ACCRUED INTEREST, TO BE REPAID UPON DEATH OR MOVING INTO LONG-TERM CARE. EQUITY RELEASE WILL AFFECT THE AMOUNT OF INHERITANCE YOU CAN LEAVE AND MAY AFFECT YOUR ENTITLEMENT TO MEANS-TESTED BENEFITS NOW OR IN THE FUTURE.

CHECK THAT THIS MORTGAGE WILL MEET YOUR NEEDS IF YOU WANT TO MOVE OR SELL YOUR HOME OR YOU WANT YOUR FAMILY TO INHERIT IT. 

IF YOU ARE IN ANY DOUBT, SEEK PROFESSIONAL FINANCIAL ADVICE.

Source data:

[1] https://www.keyadvice.co.uk/about/press-release/older-homeowners-release-a-record-4-4-billion-in