In the sector’s busiest start to any of the six years on record, nearly a billion pounds was raised by the over-55s in the first quarter of 2019 using home equity release.
The Equity Release Council confirmed in its latest report that, in the first the months of 2019, 20,400 customers borrowed an average £97,763 against their homes using equity release schemes. The figures represent an 8% rise on the same period last year.
In the previous quarter, 12,891 new equity release plans were agreed worth a total £1.08 billion, at an increase of 25% year-on-year. In 2018, total lending activity grew for the seventh consecutive year to unlock nearly £4 billion and, in the last quarter of 2018, 55-plus homeowners collectively cashed in £136 of housing wealth every second.
Care costs were the reason for 42% of borrowing against the homes of those over 75, including payment for property adaptations and home help costs. Money borrowed by 55-75s was used for a variety of purposes, from helping younger generations with housing costs to paying for home improvements.
Consumer groups warn that homeowners’ appetite for equity release might lead to the children’s inheritance being lost to lenders. Interest rates on lifetime mortgages, the most common method of equity release, currently average 5.1%. This is significantly higher than other types of mortgage interest rates.
The lenders claim that ‘unlocking housing wealth’ is becoming the new ‘normal’.
Demand continues to grow and demand has trebled since 2015, fuelled by increased life expectancy and lower pension expectations, as well as the high number of interest-only mortgages reaching maturity.
A survey released by research firm, Mintel, estimated in May 2018 that the market would grow by 42% over the year and that equity release could allow borrowers to access £3 billion by the end of the year. That figure has been increased to an estimated £5 billion this year.
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