The amount of wealth accessed by homeowners in 2017 by using equity release has increased 55% over the year helped by more products.
Research from the Equity Release Council shows the demand from equity release buyers aged 55 and older is soaring with £1.4 billion unlocked from property in the first half of 2017.
Lenders have helped this growth increasing the number of new products by 34% from 58 in August last year to 78 product options today giving homeowners more choice.
Higher house prices and a lack of supply of suitable homes for the older homeowner to downsize has seen lending increase 55% from £0.9 billion in the first half of 2016 to £1.4 billion this year.
Family members can use a lifetime mortgage to release cash for a specific reason such as gifting the deposit to children and grandchildren as a deposit on their first home.
More competition reduces the cost
With more innovation from lenders there are 51 more product innovations on the market now than in 2014 and 225% more than a decade ago when there were only 24 product options.
The increasing competition is driving down the average equity release rates which have reduced to an all time low interest rate of 5.30% pa compared to 6.20% pa in January 2016 although the lowest rates start at under five percent.
See what the maximum cash you can release from your property, savings by making overpayments and the interest rates using this link:
Free equity release calculator with instant results to release cash from your home.
Greater flexibility is offered from lenders such as Liverpool Victoria, Just, Aviva, More 2 Life and Aviva with 68% allowing equity release mortgage buyers to make ad-hoc repayments free from an early repayment charge.
Making repayments can reduce the cost of equity release saving save a significant amount in interest charges accrued over time and free of the early redemption charge (ERC) penalty if kept under 10% of the lifetime mortgage.
If you plan to repay more than 10% of the mortgage there are two types of plan structure to consider, either fixed penalty where you know the costs in future years or gilt based penalty using a formula to determine the penalty which could be nil or a significant amount.
Not everyone needs the largest amount possible from their property and another useful feature called drawdown allows you can arrange an advance for the maximum loan but only take what you need initially.
You only pay interest on the amount you borrow knowing that you can drawdown amounts in the future when you need it and with a rate available at that time.
Older homeowners accessing wealth
Average age of new equity release buyers is 71.5 years old for drawdown plans and has remained similar since records began in 2014.
Benefits from equity release are better for older homeowners as provider loan to values increase with age and with less time to spend your money there is less rollup interest to pay back.
Older homeowners could improve the quality of life by relocating to a coastal town or national park to enjoy the outdoors by buying a new house with equity release even if it is much more expensive than their existing home.
The Equity Release Council research has shown an increasing number of older homeowners aged 75-84 are unlocking the wealth in their homes.
Over the past year the number of new equity release buyers in this age bracket has increased from 23.2% to 25.1% of all drawdown plans and lifetime mortgages are preferred over home reversion plans.
Nigel Waterson, Chairman of the Equity Release Council said, such growth also comes at a time when the challenge of ensuring adequate financial provision for consumers in later life has never been greater.
The older population continues to grow and the shit away from final salary pension schemes will likely result in future retirees facing a greater savings shortfall in later life.
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.
It is therefore clear that the role of housing wealth in funding retirement will only become more important in the future, says Mr Waterson.
What are your next steps?
Why not speak to our London City Mortgage advisers if you intend to unlock wealth from your home, we can recommend the lifetime mortgage product and manage the application through LCM.
Find out more about the interest rates and types of products to release cash or more location to buy a more expensive home at this link:
Free equity release quote with types products to buy a more expensive property.
At LCM our expert advisers can source equity release plans to match your requirements. Learn more by using the equity release calculator, property value tracker chart and mortgage costs calculator.
