Over the last few years equity release has evolved from being a last resort to a core part of mainstream financial planning. But for many older homeowners equity release is not just a nice option to have, but a much-needed financial lifeline. 

Property wealth in the UK stands at £5.2 trillion after mortgage debt and much of that wealth is in the hands of over 55s. It’s no surprise then that many older homeowners have more property wealth than pension wealth. 

There are several economical and societal factors that are increasingly shining a light on equity release as a necessity rather than a luxury. Here are some of the key reasons why equity release is no longer a want, but a need:

Cost of Living

The increased cost of living is forcing millions of households across the UK to look for ways to make ends meet, and retirees are among the most vulnerable. With pensions already being squeezed, some older homeowners are releasing equity to help meet the increased cost of living.

Interest-only Mortgages

One of the most popular reasons why people release equity is to repay an interest-only mortgage that is coming to the end of term. According to UK Finance, interest-only borrowers owe on average £104,000. The majority of borrowers do not have the funds to repay what they owe and so equity release is the only option for many.

Social Care

Some people mistakenly think that social care in the UK is paid for by the government and through taxes but that’s not the case. The care system is complex and can be very expensive. Many people release equity to pay for care in later life, whether that be in the comfort of their own home or in a permanent care home.

Divorce

The divorce rate in the UK is declining overall, however the divorce rate among over 60s is increasing. Equity release helps older homeowners who are going through a divorce to split their assets. It also enables both parties to purchase a new home on their own that they wouldn’t afford otherwise. 

Life Expectancy

As an ageing population we are living longer and therefore we’re spending more time in retirement. As a result, we need our retirement savings to last longer. Many older homeowners have insufficient retirement savings to support them throughout later life. They turn to equity release to supplement their retirement income and bridge the shortfall between their income and outgoings.

Living Inheritance

More and more people are gifting an inheritance to their children and grandchildren whilst they are still alive. There are several reasons why a living inheritance is becoming more popular:

  • We’re living longer which means that it’s taking longer for older generations to pass down wealth to younger generations at a time when they need it most.
  • The increased cost of living is putting financial pressure on families and they are leaning on older generations for financial support.
  • It’s becoming increasingly difficult for first-time buyers to get on the property ladder, especially since rates have increased. By gifting a deposit to their children and grandchildren, older homeowners can help first-time buyers reduce the loan to value on their mortgage, and in turn, achieve a lower interest rate and more affordable monthly repayments. 

These are just a handful of many reasons why our clients seek advice about equity release. At Personal Retirement Planning we offer specialist equity release advice to help people understand whether releasing equity is the right decision based on their circumstances.

To learn more about how we can help, please contact one of our Equity Release Specialists, Barry Leigh, on 07980 210953 or email info@prpltd.co.uk.