Housing wealth in England of £1.8 trillion can be accessed with equity release and used by an aging population to fund retirement.
The latest report from the Equity Release Council shows annual lending has exceeded £2 billion with yearly growth doubling from 16% in 2015 to 34% and lifetime mortgage customers now the fastest growing market segment.
Current low interest rates means less income from money purchase pensions and savings leaving a rapidly aging population with a shortfall to maintain their living standards.
For equity release buyers, low rates reduce the cost of rolled-up interest accumulating for lifetime mortgages, increasing the chance of leaving equity for beneficiaries.
See how much cash you can release from your home and the roll-up interest over time and how much equity you can leave to your family using this link:
Free equity release calculator with instant figures and the equity you can leave to your family.
Of the total £2.6 trillion housing in England, homeowners aged over 55 could access £1.8 trillion using equity release giving them the opportunity for extra income.
Retirement income is falling
According to the report, the level of income in retirement from a money purchase pension is not sufficient to maintain living standards creating a crisis in the coming decades.
An employee with average earnings of £28,000 contribution 8% per year to their pension can expect to retire with a pension of only 15% of their final salary.
Their pension contribution is £2,240 per year however a capital repayment mortgage of four times their salary would be twice this amount at £4,480 per year.
UK households are accumulating wealth in their property at a faster rate increasing from £40.7 billion in 2015 to £62.7 billion in 2016 through regular and lump sum capital repayments on their mortgages.
The report also states it would be increasingly illogical to ignore the potential to unlock the wealth people have accumulated in their homes to help fund retirement.
With the recent pension freedoms people can access their funds as lump sums rather than as income and require further capital later in retirement.
Releasing equity from your home
Equity release is used typically by those aged 65 and over and recent changes to mortgage rules require lenders to assess affordability of loans to borrowers for residential mortgages.
Older home movers or remortgage buyers applying for a conventional mortgage must show their pension income can cover the monthly repayments costs to the lender, making borrowing difficult.
In contrast equity release does not require any repayments for your lifetime and no affordability assessment is required making this an attractive alternative even when downsizing your home and releasing cash.
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.
Common uses for equity release include maintaining living standards, paying off existing mortgages and loans, paying for travel, funding home improvements or even relocating and buying a new property.
The report suggests in 2016 about a quarter of homeowners using equity release do so to support family and friends.
Older homeowners have been using equity release as a way to help children and grandchildren with the deposit for a home as first time buyers, to help with debt after a divorce or the cost of higher education.
Equity release allows homeowners to arrange lump sum cash upfront or drawdown amounts in stages. This offers greater flexibility with easy access and they only pay interest on the amounts they take which reduces the overall cost.
What are your next steps?
Speak to our London City Mortgage advisers when you are about to release cash from your home, we can recommend the equity release plan and managing the process of completing the lifetime mortgage.
Find out more about the leading products from the providers to release cash from your property and equity you can leave to your beneficiaries with this link:
Free equity release quote with leading products and interest rates when releasing cash.
Our expert mortgage advisers can find the products that fit with your objectives to access funds. Learn more by using the equity release calculator, property value tracker chart and mortgage costs calculator.
