Two Thirds Use Equity Release To Make Later Life Home Modifications
Record numbers of UK home owners used equity release products to help younger relatives buy property in 2018.
According to the 2018 Equity Release report, published by retirement finance specialists Key, 27% of equity release users unlocked the equity in their homes with the express purposes of gifting it to their children so they are able to afford a deposit. This figure increased from 24% in 2017 to 27% in 2018.
Whilst this increase highlights the emerging and sustained prominence of the Bank of Mum and Dad (BOMAD) as a legitimate lender in the housing market, the majority of older home owners are continuing to use equity release products as a way of modifying their homes for later life.
64% of equity release products cited home improvements, modifications and gardening upgrades as the main use for the loans.
Almost a third (31%) used the money withdrawn from the equity in their homes to consolidate their debts, pay off loans and ensure their liabilities are reduced for later life.
Whilst the majority used the products to finance their retirement, help relatives, or modify their homes so they are suitable for later life, a third used some of the proceeds to kick off their retirement years by paying for the dream holiday.
Corroborating the Equity Release Council’s report on 2018, Key also found that plans significantly increased. Overall, equity release products increased by 21% in 2018, up from 38,955 to 47,081.
In total, lending increased from £3.1 billion to £3.6 billion, an 19% rise on 2017’s figures.
Will Hale, Chief Executive at Key said:
“The growth in gifting highlights the intergenerational benefits of equity release for families with money being used to clear debts, fund university fees and pay for house deposits and weddings. Even the use of equity release to fund home and garden improvements has benefits for families as it helps people to ‘age-proof’ their home and preserve wealth for the family.
“Debt remains however a major issue for some retired people and substantial numbers are relying on equity release to clear credit cards and loans as well as paying off mortgages.”
Have conveyancers noticed an increase in first-time buyers utilising the bank of mum and dad to secure the funding for their first home? Do you think that these trends are going to increase further in the future?