Equity release lending up 17% to £753m – Mirfin
Equity release lending in the first half of the year has seen a sharp rise, with retired homeowners cashing in £753m to help with retirement planning, Dean Mirfin has said.
“Property wealth is making a massive contribution to retirement planning and the equity release market is growing rapidly in response with double-digit growth,” the technical director at Key Retirement said.
The Preston-based provider’s Equity Release Market Monitor showed that the total property wealth released in the first six months rose by 17 per cent, from £641m to £753m while the total number of plans climbed by 10 per cent, from 10,013 to 11,007.
The average amount released rose to £68,500, according to the eight-page publication, an increase of £3,500 year-on-year, highlighting pensioners’ confidence in using property wealth for retirement planning.
“Cuts in pension allowances and contribution levels plus the review of pension tax treatment underlines that property investments are major assets which should be considered as part of anyone’s retirement planning,” Mr Mirfin said.
Regional variance ranged from average releases in the north west of over £53,000 to over £142,000 in London.
The findings showed money was used to boost retirement standards, with 58 per cent using some or all of their cash to improve their home or garden while 28 per cent used it for holidays.
Family and friends also benefited with 25 per cent of over-55s handing out cash to relatives.
The average age of customers turning to equity release rose from 69 to 71 but they were also wealthier, thanks to a 9 per cent rise in average property values.
However mortgage debt, including interest-only loans, was a major issue, with 23 per cent of customers paying off home loans with some or all of the money, compared to 20 per cent year-on-year.
Around 29 per cent used the cash to pay off credit cards or loans.
Andrea Rozario, chief corporate officer at Bower Retirement Services, said: “Interest-only mortgages are a major issue for advisers, and increasingly they are seeing equity release plans as a solution for clients who have the assets but not the cash to clear a major debt.
“However it is not the only factor driving equity release sales as the market continues to expand on the back of growing confidence in using property wealth as a major part of retirement planning.”
Adviser View
Brendan Sheehan, financial adviser at Kent-based Alexander House Financial Services, said: “A key factor in what I am seeing is people coming to the end of their interest-only mortgage and turning to equity release. It also shows that people are getting the right advice, and don’t see equity release as something negative as they may have done years ago. I am seeing a small bit of gifting, but used less for pension income.”
Email: jonny.paul@ft.com
