Equity release no longer last resort, finds Saga report
Equity release sales have surged by 30% over the last year, according to a new report from the Saga Equity Release Advice Service. There is also a change in the way people are using the money they release, with home improvement the main reason people choose to withdraw the equity in their property.
Since 2012, the proportion of people using the some of the money they release for this purpose has increased by 10%. Two thirds of people spend the money on their home, typically spending over £13,000.
Money is also being used to pass on wealth to children and grandchildren. The amount people have gifted to family has increased by over a quarter since 2012 and now typically stands at £33,000.
The report also showed that equity release’s reputation as a ‘distressed’ option was diminishing. Five years ago, 40% of people took money to cover unplanned spending, compared to just 25% today. Saga suggests this could be due to the increasing popularity of draw-down plans, which allow people to take money as and when they need it rather than incurring interest on the full amount when they first take out a plan.
Gloria Barker, head of products at Saga, said: “Our research demonstrates that equity release is increasingly being considered as a mainstream solution future proofing their homes and income for later life – making them less dependent on the state. That’s a big change from the traditional perception that it is limited to those who find it hard to make ends meet.
“While people are beginning to see their house as an asset to fund later life rather than something for their family to inherit, this does not mean that they are not prepared to help family out financially. By far one the biggest chunks of money they withdraw is to gift to their relatives, showing that they are keen to pass their wealth on down the generations.”