The Equity Release Council reports biggest quarter for homeowners borrowing from their property with £393 million of mortgages.
Older homeowners in need of cash have arranged a record £393.3 million in lifetime mortgages by using equity release according to the Equity Release Council.
These lifetime mortgages are borrowings against a person’s property with the option to roll-up the interest repaying the loan when the property is sold such as on death or when they enter a retirement home.
To reduce the cost of the mortgage it is possible to repay the interest as you go if you intend leaving equity to beneficiaries otherwise roll-up interest can quickly erode property equity.
Rising demand from older homeowners
In the first quarter of 2016 year-on-year the total value of equity release lending has increased by 21% marking the 25th anniversary of the first industry standards being developed.
There were 5,175 new equity release plans in the first quarter, 6% higher than a year ago suggesting the amount people are borrowing is increasing.
On average homeowners borrowed £76,000 for home improvements, holidays, support family members such as first time buyers or home movers in buying a home or even relocating and buying a new property.
Most popular are drawdown lifetime mortgages that allow you to take money when you need it rather than the full lump sum at one time.
See how much you can take using a lifetime mortgage if you intend to relocate and buy a more expensive property with this link:
Free equity release calculator with instant figures to buy a more expensive home.
By value 60% of all loans were drawdown amounting to £234.5 million from 3,450 plans compared to the remainder 40% for lump sum cash upfront valued at £158.8 million.
Housing wealth more important
Nigel Waterson, chairman of the Equity Release Council said housing wealth was now centre stage when planning for later-life.
The older generation are often asset rich but cash poor with their home likely to be their greatest asset forming part of a person’s planning for retirement which could include downsizing your home and releasing cash.
The Financial Service Authority (FCA) has recently reduced affordability assessments for lifetime mortgages which will help more people benefit from equity release and the sector needs to innovate to satisfy customer demand, says Mr Waterson.
Demand for equity release is likely to increase following the rise in property value and continue in the future with a rapidly aging UK population.
Older remortgage buyers are often forced to repay their loan at a certain age and rather than downsizing they can consider the many flexible product features of lifetime mortgages allowing them to live in their home for their life.
What are your next steps?
Talk to our London City Mortgage experts if you intend to downsize your home and release cash, we can recommend the equity release product and manage the process to provider valuation and offer.
Find out which products offer the lowest fixed interest rates if you are planning to relocate and buy a new property using this link:
Free equity release quote with the lowest interest rates to buy a new property.
At LCM our mortgage advisers can find the most competitive products to meet your needs to relocate. Learn more by using the equity release calculator, property value tracker chart and mortgage costs calculator.
