Equity release becoming a ‘lifeline’ for interest-only borrowers
The latest Equity Release Market Monitor from Key Retirement revealed that 2016 saw the number of equity release plans and the value of lending hit record highs. The number of plans rocketed 17% to 27,666, while the value of those plans jumped by more than a quarter (26%) to £2.15bn.
A substantial part of that growth is down to increasing numbers of borrowers looking to clear existing debts on property – around one in five of all equity release plans were taken out in order to pay off an outstanding mortgage, with borrowers in the 65 to 69 age group the fastest growing subset of equity release borrowers.
Providing a lifeline
It’s not just about freeing up some additional income though – according to Key Retirement equity release represents a “lifeline” for borrowers coming to the end of an interest-only mortgage, but with few options in order to clear the outstanding capital they owe.
Dean Mirfin, technical director at Key Retirement, pointed out that 2017 is the start of the first wave of interest-only maturities. He predicted that as more borrowers come to the end of their interest-only deals, they will increasingly look to equity release as an answer.
As the report states: “With reduced incomes in retirement, and tightened mainstream mortgage criteria, many are faced with the only option of selling their home to clear the debt. Increasingly though, equity release is providing a robust alternative to meeting this need.”