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The rise of equity release: why more people are unlocking wealth accumulated in bricks and mortar
The rapid rise of equity release is indisputable. In fact, according to trade body, the Equity Release Council*, during the first quarter of 2021 alone, more than 16,500 UK customers harnessed the power of equity release to unlock over a billion pounds worth of wealth. Will you take action in the first quarter of 2022?
source *https://www.equityreleasecouncil.com/news/q1-2021-equity-release-market-statistics/
Changing opinions
Once viewed as a last resort for home-owners, today, equity release is widely considered to be a viable solution for individuals seeking to enjoy the benefits of their property’s capital appreciation, help their descendants onto the housing ladder, or even to move home. Why unlock the wealth in your bricks and mortar? Well because it's what you've worked hard for all your life.
3. External forces behind the rise in equity release
1. Figures from the Financial Conduct Authority (FCA), show that over 200,000 lifetime mortgages were bought between 2015 and the end of 2020, with the number increasing by 74% over the past five years. This rise of equity release in recent times can largely be attributed to three external factors: longer life expectancy, soaring property prices, and greater levels of financial literacy.
2. The UK’s property market is booming. According to the latest data from Halifax, British house prices rose by the steepest rate in 15 years in 2021, with the average cost of property increasing by 1.7% month-on-month and 7.4% annually. This, the building society says, is due to people working more from home and seeking bigger properties, coupled with the unprecedented Stamp Duty holiday. house prices have risen from around four-times average earnings in the mid-1990s to more than eight-times more recently.
3. Rising care costs: figures and projections produced by the Office for National Statistics have long shown that the UK’s population is living longer. Latest estimates show that in 50 years’ time, there are likely to be an additional 8.6 million people aged 65 years and over – a population roughly the size of London. With equity release products you can stay in your own home while releasing money for the standard of care you deserve.
If you purchased your home 30 years ago
You will likely have more equity in their property than you ever anticipated: this is your wealth.
You can unlock it now. https://www.agepartnership.co.uk/mcx/equity-release/do:landing/mc0:InboundReferral/mc1:LotusPropertyConsultancyLtd/mc2:Calculator/
Opportunity for your children and your children's children
Affordability (home ownership) - something we once took for granted, has deteriorated dramatically for first-time buyers. This has contributed to home ownership rates falling to 62-64% in the past five years, levels last seen in the early 1980s. We have come to a point were millions of us have a significant amount of capital locked away in property – while others in our families can’t stretch to get on the first rung of the property ladder.
A growing motivation to release equity from the value of your house is to help loved ones
Remortgaging to harness your wealth
Capitalise on rising property prices, Against a backdrop of rapidly rising property prices, savvy homeowners are increasingly realising the benefits of shopping around and switching to a better mortgage deal – saving thousands of pounds in the process. The latest mortgage search activity data from Legal & General Mortgage Club indicates searches on behalf of homeowners that wanted to remortgage after less than six months have jumped by 40% as individuals cash in on strong house price inflation. Elsewhere, the latest monthly remortgage snapshot published by LMS reveals that the primary driver for a third of all remortgages in July this year was to release equity from properties, with 49% of borrowers increasing their total loan size by an average of £16,300.
But for those nearing retirement age, capitalising on the property boom through a standard remortgage may not be an option.
If you are over 55 Equity release products may offer a better option. Drop us your contact details and we'll arrange for FSA regulated industry professionals to contact you promptly and arrange to discuss the best products for you.
There's no maximum age for application
While there’s no official maximum age for a mortgage application, it is, generally speaking, difficult to secure a standard mortgage later in life. As the HomeOwners Alliance advises, “If you’re aged 55 and over and want a mortgage or to remortgage into retirement, you may struggle to get the loan you want”. Essentially, if you take out a mortgage while you’re still working but with a term that would continue into retirement, the lender will only use your income after retirement to calculate what you could afford in mortgage payments and consequently, how much they could lend you.
Tax free income
If you are aged 55or over, choosing to unlock capital from your home through equity release can enable you to free up money to invest elsewhere, follow your dreams, or pass on an inheritance while you are still alive ( more tax efficient, if you live on for at least seven years - another reason not to leave it too late!).
A more sophisticated choice
IThere was once a certain level of stigma surrounding equity release, but the market has professionalised since its earliest days, and rates are now much more favourable than they once were. Since 2015, the FCA has required lenders to report the initial interest rate of every lifetime mortgage sold. Its data shows that borrowers paid an average interest rate of 3.4% last year, down from 5.79% in 2015. For those who took out equity release when rates were high and there was little flexibility, there is now the option to switch your plan in the same way that you would with a standard mortgage, enabling homeowners to potentially save thousands of pounds in interest by taking advantage of current low rates. Earlier this year, equity release advisory firm, Age Partnership, made headlines when it expanded its service offering to include a switching service, consisting of a team of 12 advisers to review existing equity release plans. At the time, the firm’s CEO, Steve Auckland, commented: “No one should be stuck on a historic high rate thinking they have nowhere to turn for help. Rates are towards the lowest they have ever been, so someone who arranged a plan only a few years ago on a rate of 6% can potentially switch to below 3% and save thousands of pounds over their life expectancy”. Of course, like any financial commitment, the decision to release equity from your home – or switch to a new provider - shouldn’t be taken lightly. It is important to get specialist advice and discuss: how equity release will affect the amount of inheritance you can leave; how the funds released could affect your entitlement to means-tested benefits now or in the future; alternatives to equity release such as downsizing or taking in a lodger; and any charges that you may incur if you wish to pay off an equity release plan early. For those looking to take the first steps in unleashing equity in their own home, Age Partnership works with a broad array of lenders, enabling its customers to compare over 700 plans to find what will work best for them. Its simple online calculator enables those who are curious about equity release to quickly discover how much equity they could release – and with property prices continuing to rise the figure could be a pleasant surprise. In my experience, money can’t buy you happiness – but it can certainly allow you to acquire a certain amount of freedom. At a time when Nationwide has reported average UK house prices have risen by nearly 9% in the last three years alone, it is no wonder that the rise of equity release continues to accelerate as people choose to unleash the value tied into their home to spend on things that really matter. Use our free online calculator to see how much wealth you could unlock from your home.