People borrowing equity in their property has reached the highest levels since records began according to the Equity Release Council.
The Equity Release Council has released the latest data showing the demand for accessing equity from a property has reached an all time high since 2002.
For the first nine months equity release lending reached £1.02 billion, more than the entire annual lending for the years from 2009 to 2012 and already 95% of the total for 2013.
Lending for the third quarter was £375.5 million up 15% on the second quarter and 32% higher than this time a year ago.
Popularity for equity releasing increasing
Rising house prices allows the equity release buyer to access money using a lifetime mortgage and consolidate debt, buy a dream home in retirement or even help your children start or expand a business.
See how much cash you can access using equity release if you would like to buy your dream home on the coast or national park with this link:
Free equity release calculator with instant results to buy your dream home.
Homeowners over the age of 55 are turning to equity release to pay off debts, provide extra income in retirement or improve their quality of life.
Older remortgage buyers are often required by the lender to repay their loan at a particular age such as 70 or 75 and the product features of lifetime mortgages can allow you to live in your house so avoid the need to downsize your home.
In the third quarter homeowners 5,565 released equity, rising from 4,975 in the same quarter last year, 4,148 in 2011. The total number of homeowners taking out loans this year is 15,624 and the amount borrowed is also increasing.
For quarter three 2014 the average value of lending reached a new record of £67,467 up 9% on the previous quarter and 18% higher than the same quarter last year.
Help with the deposit for a first time buyer or home mover can come from family members using equity release to access cash with a lifetime mortgage and gifting to a child or grandchild.
Increasing costs of equity release
Equity release providers use a lifetime mortgage where interest charged rolls up for the lifetime of the borrower, although repaying the mortgage early is possible and typically 10% is free of the early redemption charge (ERC) penalty.
Interest rates are typically higher than a residential mortgage and the amount of borrowing plus interest can be considerable. Releasing £100,000 with interest rates at 6% would increase the loan to £169,800 in ten years and at 8% this increases to £201,100.
There are different types of plan structures to consider for equity release if you intend to repay part of all your mortgage and potentially high repayment costs associated with plans related to the 15-year gilt yields.
If yields fall the borrower must pay a charge which could be up to 25% of the value of the original loan. As yields have reduced considerably in the last five years, many homeowners with older lifetime mortgages must pay these charges.
For homeowners you can consider replacing an existing equity release plan on a high interest rate with a lifetime mortgage on a lower fixed interest rate as the amount of savings you make increase the property equity you can leave to your family.
Now yields are at their lowest ever levels, the risk of falling yields is considerably lower making equity release a safer option than before the financial crisis in 2008.
What are your next steps?
Talk to our London City Mortgage advisers if you would like to buy a dream home, we can recommend the equity release plan and manage the application through LCM.
Find out which would be the best products and competitive interest rate to buy a more expensive dream home using this link:
Free equity release quote with the best products to buy a more expensive property.
At LCM our experts can select the provider and products that meet your requirements now and in the future. Learn more by using the equity release calculator, property value tracker chart and mortgage costs calculator.
