More interest-only homeowners turn to lump sum equity release for bailout
Sales of lump sum equity release products rose from 30% of all product sales, to 40% in quarter one as older borrowers felt the need to access equity in one go, rather than gradually through a drawdown product, the Equity Release Council data found.
The average amount released to boost retirement income increased 12% to £76,115 in the three months compared with £66,730. In London this rose to almost £134,350 up from £129,991.
Some 21% of older borrowers used some or all of the equity withdrawn from their homes to pay off their mortgage balance, spending an average of £63,000 on mortgage debt.
Dean Mirfin, technical director at Keyretirement.com, which carried out the analysis of Equity Release Council data, said: “It’s long been predicted that as the first large wave of interest-only mortgages maturities begins, more customers will turn to equity release to plug this gap.”
The analysis, covering the first three months of 2016, showed record growth with total property wealth released rising to nearly £415m, up from £341m last year. Home renovations proved to be the most popular reason for releasing equity, with 63% of borrowers using some of all the money on home and garden improvements.
Paying down debt ranked highly among the uses for equity release. Just under 30% of borrowers in Q1 settled credit card and unsecured loans balances. Some 14% of borrowers needed to use the money to pay regular household bills.
“The record high number of equity release plans being taken out underlines how property wealth is an important part of retirement planning,” said Mirfin. “Pensioners are making the most of successful property investment and rising house prices to substantially improve their retirement standard of living. However retiring in debt is still a major issue.”