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More than half of equity release funds used for debt management

Nick Cheek
Written By:
Nick Cheek

Most of the value of equity released in Q1 this year went towards debt management, data from a broker firm revealed.

According to Mortgage Advice Bureau (MAB)’s Later Life Market Monitor Report, 54% of the funds allocated were used for this reason. This included over a third for mortgage repayment, 15% for a lifetime mortgage and 6% for unsecured borrowing. 

The proportion of equity release which was used to repay a mortgage increased by 2% compared to last year, while the share of money released that was used for remortgaging fell by 7% to account for 15% of lending.  

The share of the value of equity released to gift to family or friends came to 13% in Q1 and made up 19% of customers. Nealy half (45%) of borrowers used equity release for home improvements compared to 39% last year, but this only accounted for 11% of the value unlocked from homes. 

MAB found that borrowers put the money towards essential repairs and maintenance such as central heating upgrades and rewiring, while the desire for new kitchens and conservatories declined. 

Just 2% of borrowers released equity for holidays, making up 16% of the value lent. This was up from 11% last year. 

The proportion of borrowers releasing equity to repay mortgages dropped from 29% to 24% annually, while the share of people using it for unsecured borrowing fell from 29% to a fifth. 

MAB said the drop in using equity to repay unsecured debt could be down to more flexibility compared to other kinds of borrowing and people prioritising other commitments. 

A shift in the market

Steve Humphries, proposition director (later life and wealth) at Mortgage Advice Bureau Later Life, said the data gave an insight into the “unprecedented level of change” the market saw following the mini Budget. 

He added: “As the market continues to settle, it’s crucial for us to understand and adapt to these shifts in customer behaviour regarding equity release usage.  

“With this in mind, it’s encouraging to see that, despite these market changes, debt management remains the driving force for equity release – demonstrating how equity release continues to empower individuals to reach their financial goals with confidence and peace of mind.”