Majority use equity release cash for home improvements
New research reveals that more borrowers are using their equity release loans to pay for home improvements rather than to repay their mortgage.
Late last week, YourMoney.com reported that equity release borrowing had hit record levels. And according to new research, the majority are using the proceeds to upgrade their houses.
Later life mortgage advice firm Responsible Life analysed its client base and found that for the first time, the majority of borrowers were unlocking their property wealth to renovate their homes.
For five of the nine months this year, this has been the main driver for taking out equity release. In contrast, the firm said there were no months in 2020 or 2021 where home improvements were the main reasons for taking out equity release.
The last time repaying the mortgage was not the main driver for later life borrowing was in 2019, the broker firm’s records show.
‘First time we’ve seen such a change’
The firm said the trend was likely temporary and driven by the boom in property prices during the pandemic. On average, house prices in the UK were 15.5% higher in the year to July 2022 and since 2020, the average home has seen a £60,178 rise in value.
Steve Wilkie, executive chairman of Responsible Life, said: “This is the first time we’ve seen a change like this in the equity release market. You used to be able to guarantee that mortgage repayment would be the most popular reason customers would take out a lifetime mortgage.
“This year, we’ve seen that assumption turned on its head and it’s likely to be a symptom of how, for homeowners, the proportion of their wealth tied up in their main home has ballooned over the past two years.
“We expect mortgage repayment to regain its crown in the medium term, but it’s significant that what was once considered a product of last resort is now clearly anything but.”