Equity release demand rises during pandemic – pensioners more ‘worse off’ than expected
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Equity release allows homeowners to access the equity (cash) tied up in their home through a number of products. These products can only be accessed by those over the age of 55 and they’re usually issued through what is known as a lifetime mortgage or home reversion plan.
These products can allow homeowners to access cash if need be but they can be costly in the long run and as such, careful consideration is usually advised before action is taken.
However, according to SunLife’s recently released Equity Release Report 2020, some of this caution may be easing among the UK’s retiree population.
The report detailed six percent of over 55s say the pandemic has made them consider equity release when they wouldn’t have before.
Of those surveyed, many shared that having their lives impacted by coronavirus forced them to reassess their priorities and take a more ‘money is there to be spent’ attitude to life.
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According to the report, the main reasons why coronavirus has changed people’s minds about equity release fall into two main camps:
- Those who say the pandemic has made them think that ‘life is too short’ and see equity release as a way of funding all the things they’ve always wanted to do.
- Those who have been impacted financially themselves, or have family who has, and is now considering equity release as a way of boosting falling incomes, pensions or savings
Simon Stanney, an equity release director at Sunlife, commented on the findings: “Our research shows that Covid-19 has impacted people’s approach to money.
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“Some have been forced into looking for ways to boost falling incomes or pensions, or into helping others who are struggling, while for others it has been a wakeup call, making them realise they can’t take their money with them, so they may as well spend it now.
“Earlier in the crisis, we saw a shift in the reasons why people were enquiring about equity release, from ‘enhancing’ their own lives towards ‘gifting’ i.e. looking to release cash to help family members who had been hit by the crisis, so I am not surprised to see there has been a shift in consideration too.”
Indeed, when examining the latest data from the Equity Release Council it is clear to see demand picking up.
According to their quarter three 2020 equity release market statistics, the number of new equity release plans agreed (10,351) increased by 41 percent from the previous quarter as national lockdown conditions were eased.
Additionally, a gradual increase in new customer activity was seen, with July seeing 3,147 new plans agreed, followed by 3,228 in August and 3,976 in September.
On top of this, £963million of property wealth was unlocked in total during quarter three 2020 by new or returning customers, up by 38 percent from quarter two.
However, despite the best intentions of savers additional research from SunLife revealed what homeowners plan to use equity release cash for and what it’s actually used for can be two very different things, emphasising the need for clear planning.
SunLife asked homeowners who were considering equity release what they planned to do with the cash and 55 percent said they would use it to boost their income for a more comfortable lifestyle while a third (32 percent) said they planned to use the cash to fund home improvements.
Despite this, when SunLife asked people aged 55 or over who had already taken out an equity release plan what they used their money for, different obligations emerged.
Home improvements came out on top (60 percent) with fewer people using the money for extra income.
Additionally, many over 55s detailed they were worse off than expected at this age and Simon concluded by addressing this: “Our research also reveals that one in four over 55s say they are worse off than they thought they’d be at this stage of life and are concerned they will run out of money before they die, so it is perhaps no surprise that many are turning to equity release to supplement their income and clear debts because their financial situation is not as secure as they hoped it would be.
“And while equity release is not right for everyone, it can offer a solution to those who need an income boost and have cash tied up in their property but don’t want to move.”
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