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The Growing Popularity of Equity Release Schemes

Published: 23 June 2018

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Author: Carl Shave - CEO and co-founder
Last updated: 30May2024

The value of cash released from homes using equity release plans passed the £3bn mark for the first time last year, representing a £909m increase on 2016. It was also three times higher than the total amount raised through equity release schemes in the previous four years. But what is driving the surge in popularity of equity release plans and why has a product that was once viewed as a method of last resort become so much more attractive?

What is driving equity release growth?

One in eight people will reach retirement age this year with no pension savings at all, and the number of households retiring with debt in the UK is rising. That, combined with falling interest rates and the booming housing market, is the reason why the equity release market is now thriving.  There has also been a significant increase in the number of £500,000-plus properties that are being used for equity release, which illustrates a new-found appeal among the middle classes.

The Equity Release Council’s Spring 2018 report shows that the range of equity release products is growing. New product features like downsizing protection, the option to move home, high loan-to-value ratios, and cashback and cash reserve facilities have opened up equity release products to a much wider market.

In the past, one factor that made some customers reluctant to consider equity release plans was their desire to leave an inheritance to their family, but now attitudes are changing. Research from Royal London has found that just 45% of 65-85-year-olds plan to pass on an inheritance. Some providers also offer inheritance guarantees, which means an inheritance could still be left to loved ones.

Could equity release work for you?

If you are over the age of 55 and would like to raise extra cash for your retirement, equity release allows you to tap into the value of your home. However, as with any financial product, equity release does have drawbacks that mean it may not necessarily be the best option for you.

Equity release could be an appropriate solution if:

  • You have already repaid any existing mortgages or secured loans.
  • You want to stay in your home rather than selling up and downsizing.
  • You have value tied up in your home but little in the way of retirement income.
  • You want a regular income or a lump sum that you are free to spend as you wish.
  • You’d like to raise money as and when you need it and not necessarily access it all in one go.

The good news is that all equity release products – both lifetime mortgages and home reversion schemes – are regulated by the Financial Conduct Authority. That means there are strict rules in place setting out what providers have to tell you about their plans, including itemised costs, so you have a clear idea of exactly what you’re signing up for.

Why use an equity release broker?

Given the wide range of different products on the market, the assistance of an equity release broker can be invaluable. They will discuss your goals with you, tailor searches to suit your specific needs and guide you through the process to help you find the right deal.

We work with FCA-accredited partners to ensure you receive all the advice you need to make an informed decision. To find out more, please get in touch with our team.