Over half of homeowners interested in equity release: ERC

Press – Altura Mortgage Finance

More than half – 57% – of homeowners have expressed an interest in releasing equity from their property in later life.

Broken down by age, this statistic increases to 74% for homeowners aged 30 to 39 while 47% of homeowners in the 60 to 69 years old age bracket are interested in accessing money from the value of their homes.

These insights comes from the Equity Release Council’s (ERC) latest report ‘Home advantage – Intergeneration perspectives on property wealth in later life’, released today.

In it, the ERC notes 10 “far-reaching” trends that it says have made equity release a more flexible and trusted part of economic behaviour in later life.

These are as follows:

  • Decreasing workplace security lowering access to decent pensions.
  • The low interest rate environment depressing retirement income.
  • The eradication of defined benefit pension schemes.
  • Unsure long-term effects of the pension freedoms introduced in 2015.
  • A belief that the state pension age will be set at 68 years old by 2040 (and 46% of people in their 30s not believing they will ever be able to access it).
  • The heightened reliance on ‘the bank of mum and dad’ for first-time buyers. (On this point, Scottish Widows Bank mortgage director Andrew Asaam says that in 2017, the FCA worked out that 62% of homeowners under 35 year old relied on this or gifts from friends to buy their first house).
  • Easing of regulation regarding borrowing in retirement.
  • The era of record low mortgage rates.
  • The existence of longer and longer mortgage terms.
  • Greater acceptance towards carrying mortgage debt in later life.

The report details that across all homeowners, the most popular reason for taking an interest in equity release is to boost pension income and savings, followed by paying for care support at home.

For homeowners in their 30s, boosting pension income and savings is the most popular reason too, but in second place is the intention to give money to a family member for use as a house deposit.

And homeowners in their 60s are also most interested in reinforcing their pensions and savings and paying for holidays.

The ERC cheers three decades since its founding, with chair David Burrowes saying the sector has “undergone a practical and reputational transformation.”

He adds that one of the most notable trends has been the “gradual convergence of equity release with more conventional mortgage lending.”

The report concludes that the sector must retain a brisk evolutionary pace to keep up with these trends. ERC chief executive Jim Boyd believes that for later life lending to do this, greater awareness, education and product innovation is required, as well as a focus on protection.

“The growing range of later life products must not come at the expense of clarity regarding consumer safeguards and the costs and benefits involved,” he warns.

On the report’s broader findings, Just Group communications director Stephen Lowe points out that, “There is currently a divide in retirement between those with generous defined benefit pension income and those without, but we are rapidly approaching a time when this is replaced by the different outcomes for those who own their own home and those that don’t.

“For the mass market of ‘Middle Britain’ consumers, buying a home and creating equity rather than renting will have a profound effect on people’s ability to meet their own retirement aspirations,” he concludes.

Meanwhile, More2life chief executive Dave Harris says: “The fact [printed in the ERC’s report] that being a homeowner could save someone on average of over £300k across 30 years is significant – and is only one of the reasons that so many people aspire to owning their own home.”

Legal & General Home Finance chief executive Claire Singleton adds: “Getting onto the property ladder can be one of the more challenging financial goals that people face, particularly in a climate of double-digit house price growth.

“With this in mind, it’s perhaps no wonder… we are seeing a growing number of enquiries about how people can use their own property wealth to help loved ones secure their first home – we saw a 96% rise in the number of enquiries about gifting money to loved ones in the first five months of this year, compared to 2020.”

Credit: Gary Adams