Annual growth of equity release lending has reached a 15 year high as homeowners access wealth from their property.
Research from the Equity Release Council shows demand from homeowners in 2017 has seen lending at record levels with £3.09 billion accessed from properties.
There were 37,037 new buyers aged 55 and older releasing equity from their homes for the first time with more than 10,000 in the fourth quarter borrowing a record £838 million.
Homeowners are using equity release to unlock housing wealth to support their finances in later life which depends on provider loan to values, resulting in a 42% more lending compared to £2.15 billion in 2016.
If you are an older remortgage buyer you could be forced by your lender to repay your current interest only mortgage when you reach the age of 70 or 75 and rather than downsizing, you can use equity release and agree a lifetime mortgage.
Drawdown mortgages most popular
During 2017 there were 66,698 equity release mortgage buyers with 25,794 existing drawdown customers returning to access agreed reserves and 3,867 agreeing further advances.
The most popular product was the drawdown lifetime mortgage representing 75% of new plans agreed in the fourth quarter of 2017, an increase of 64% over the same quarter the previous year.
Across the whole year 71% of new customers opted for drawdown plans rather than a lump sum lifetime mortgage or home reversion plan.
Accessing drawdown cash over time is popular with customers that take an average instalment of £62,359 initially with an agreed reserve which can be accessed at any time in the future.
By taking lump sums of cash when needed, the interest rolling up over time is smaller thereby reducing the cost of equity release as you only pay interest as amounts are withdrawn.
In addition you can choose to make interest repayments each month or overpayments of 10% free of the early redemption charge (ERC) further reducing the cost.
See what cash you can take from your home using a drawdown plan and the interest rate with or without overpayments using this link:
Free equity release calculator to show the cash you can release when relocating your home.
For those using the lump sum lifetime mortgage, the maximum amount averages £101,913 which can be used for anything such as improve your quality of life, home and garden improvements or even buy a more expensive home.
The continued trend towards drawdown products to release housing equity in smaller amounts means the average lending per customer was stable year-on-year at £72,217 in quarter four of 2017.
Changing plan towards retirement
Homeowners are finding the buying power of their pension income is reducing and they are changing the way they plan towards retirement and looking for ways of raising extra money.
David Burrowes, Chairman of the Equity Release Council said, the record-breaking demand for equity release over the past year illustrates many customers viewing property wealth as a reliable source of income in later life.
Higher house prices and a lack of supply of suitable homes for the older homeowner to downsize has seen lending for equity release to rise from £1.34 billion in 2014, to £3.06 billion in 2017.
Larger numbers or over 55s taking equity release could also reduce the supply of properties making it harder for first time buyers to purchase their first home.
Equity release has allowed home movers to buy a dream home in retirement and enjoy the great outdoors such as living in a national park or in a coastal town, by making up the shortfall in the house price with a lifetime mortgage.
The advantage to the buyer is no affordability checks are required where the interest is rolled up and many lenders allow ad-hoc repayments free from an early repayment charge.
Buy-to-let landlords can increase their income in retirement by using a lifetime mortgage for their property portfolio as there are no interest payments to make.
Consumers have more choice than ever before with larger number of providers, increased range of product options helping to push interest rates to new lows, says Mr Burrowes.
What are your next steps?
Talk to our London City Mortgage advisers if you are buying a more expensive dream home, we can recommend the equity release provider and product and manage the process for completing the lifetime mortgage.
Find out more about the different features offered by the provider products and the leading interest rates at this link:
Free equity release quote with accurate interest rates from the leading providers.
Our expert equity release advisers can source lifetime mortgage products to meet your futute needs. Learn more by using the equity release calculator, property value tracker chart and mortgage costs calculator.
