A fifth of new lifetime mortgage borrowers have put the money towards a holiday or car, data from a lender showed.
Analysis of Q1 data from lifetime mortgage lender Pure Retirement revealed that 11% of borrowers said they were using the released case for a holiday and 9% were primarily borrowing to spend money on a car.
The lender said this showed the diverse uses of equity release.
Pure Retirement said this was the highest proportion of released equity being used in this way, compared to both last year and the previous quarter.
Using a lifetime mortgage to pay for a holiday was the third-most popular use of the released funds, followed by home improvements, as cited by a quarter of borrowers.
Some 21% of lifetime mortgage borrowers used the money to pay off debts and mortgages. Pure Retirement said the share of people using the money for this reason was down both on a yearly and quarterly basis.
Gifting was the fourth-most popular reason for taking out a lifetime mortgage; otherwise, Pure Retirement said the main motivation to borrow had remained unchanged in the last year.
Lifetime mortgage borrower motivations
Among lump sum borrowers, 26% used the money to pay off a debt or mortgage, which was the most common use of the product.
However, it was down from a share of 29% in the previous quarter.
The second-most popular use of a lump sum mortgage was for home improvements, while 11% used the money for gifting and 8% for a contingency fund. Pure Retirement said this indicated a trend of needs-based borrowing among this customer group.
Drawdown borrowers seemed to be driven by aspirations and lifestyle, as only 16% used released money for repaying debts and mortgages. Pure Retirement said the number of borrowers using unlocked cash for lifestyle improvements accounted for 8% of cases by volume.
Paul Carter, CEO of Pure Retirement, said: “These latest figures highlight the way that lifetime mortgages continue to cater for a diverse range of needs and audiences, and also underlines the importance of offering both lump sum and drawdown options, given they’re effective solutions for people for very different reasons.
“We don’t underestimate the importance of monitoring and understanding key customer trends, and look forward to continuing to use these sorts of findings to shape our product offering going forward.”
Related: A quarter of new customers use lifetime mortgages for home improvements
