MortgagesNov 4 2015

Pensioners get £75k boost: Key Retirement

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Pensioners get £75k boost: Key Retirement

According to the Key Retirement Equity Release Market Monitor, published today (4 November), pensioners are boosting their retirement income by an average of £74,787 by cashing in on increasing property prices.

Speaking to FTAdviser, Dean Mirfin, group director at Key Retirement, said the group has a 35 per cent share of the market and the firm uses these figures to represent the market as a whole.

Additionally, Key Retirement’s report builds on the data issued recently by the Equity Release Council and looks at many of the underlying trends amongst those releasing equity from their homes.

The Equity Release Market Monitor for the third quarter shows that the UK’s house price boom is making an increasing contribution to improving standards of living in retirement.

Key Retirement’s analysis found that 61 per cent of customers use some or all of the cash to fund home or garden improvements and 31 per cent spend money on holidays.

Debt repayment still factors heavily in motivating older homeowners to release cash from their properties, whilst 30 per cent used housing equity to repay unsecured debts such as credit cards or loans whilst 28 per cent repaid an outstanding mortgage, the data reveal.

Key Retirement added that repayment of mortgage debt increasingly is being fuelled through the increase in interest-only mortgages approaching the end of their term with insufficient, or no, repayment methods.

Total equity released in the three months to 30 September rose 19 per cent to £470.9m from £394.8m in the same three months last year, while completed plans rose nearly 7.5 per cent to 6,297 from 5,858.

Alongside this, customers released £74,788 on average compared with £67,500 in the three months to September 30 last year.

On average, those releasing cash owned a house worth £278,141 compared with £264,600 last year.

Key Retirement said that nearly a third of the total value released was in the south east where nearly £142m of housing wealth was paid out.

Completed plans rose 21 per cent in London with total value released increased by 15 per cent reflecting the growth in house prices.

The south east saw a 39 per cent increase in the total value released from the same quarter in 2014.

During the quarter, standard drawdown plans accounted for 62 per cent of sales, while single advance lifetime mortgages made up 28 per cent of sales.

Enhanced drawdown and enhanced single advance lifetime mortgage plans, which offer higher loans to value to people with lifestyle or medical conditions, accounted for almost 10 per cent of the market.

Mr Mirfin said: “Property wealth is making a massive contribution to retirement planning and the equity release market is growing rapidly in response to this.

“We expect that the market will continue its rapid growth as both HM Treasury and the regulator focus on how consumers can better understand the ways in which they can access and utilise wealth locked up in property.

“For millions of retired homeowners their biggest and most successful investment is their home and it makes sense to release money now to improve their standard of living. The reasons for releasing equity are varied which highlights how older borrowers are able to meet wide ranging needs through utilising their housing equity.”

ruth.gillbe@ft.com