More people using property as source of income as equity release rises

The equity release market has made a strong start to the year with growing numbers of homeowners using drawdown facilities to release cash from their homes, particularly while the pension stock market remains volatile.

Homeowners in February released an average of £82,666 from their properties, according to figures from Responsible Equity Release, while in January the average figure was £87,035 – bringing the two-month total to 132% higher than the same period in 2017. Meanwhile, the number of people taking out equity release plans rose by 93% in the same two-month period annually.
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Regionally, the level of equity release was varied, with Londoners releasing the most in February – £191,912 – but this was down from January’s average of £203,296. By contrast, Scotland saw an 89% increase in the total amount of equity released from January to February. In the north-west, homeowners released 35% more equity from their homes in February, while the north-east saw a 25% month-on-month rise.

Steve Wilkie, managing director of Responsible Equity Release, said: “The equity release market has had a strong but steady start to 2018, and the range of people with specific requirements that equity release can now benefit has seen the product move from niche to mainstream.

“We’re still seeing plenty of enquiries from people who took out interest-only mortgages on their homes which are coming to an end and are struggling to remortgage. But we talk to just as many retirees who are keen to have an equity release drawdown facility, so that they don’t have to take money out of their pensions while stock market volatility is so high.

“The home has become a viable income source, filling the retirement income gap left by poor performing savings accounts.”

What is equity release?

Equity release products allow homeowners to release cash from their homes, either in a lump sum or as a regular drawdown amount, or a combination of both.

There are two main types of equity release products available, which are both regulated and have become more popular in recent years – although they can cost more in the long run. The first way is by taking out a lifetime mortgage, which is available only to homeowners over the age of 55. This product allows you to borrow a proportion of the property’s value, which is then paid back upon the homeowner’s death or sale of the home. Interest on the amount released is accrued but is not paid until the end of the term.

The other method of equity release is through a home reversion scheme, which is usually only available only to over-65s. This involves selling a share of your property back to the provider at less than market value, with the agreement that you can stay in the property for as long as you wish, and the repayment is made to the provider either upon death or the sale of the home.

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