Mortgages  

Wealthier homeowners twice as likely to use equity release

Wealthier homeowners twice as likely to use equity release

Wealthier homeowners are twice as likely to use equity release to treat their family friends, according to research from Key Retirement.

The firm’s market monitor found that 25 per cent of all customers state gifting as one of the reasons for using equity release, a figure which doubles to 50 per cent for those with a property valued over £1m.

Additionally, the percentage of customers gifting increases in line with their property value and becomes more pronounced from the more than £500,000 price bracket.

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Dean Mirfin, technical director at Key Retirement, said using equity release to gift is seen by many as the best early inheritance that they can give.

He said: “It is significant that many who gift have great motivation for doing so. Firstly they can control how the monies are used and secondly they can see the impact that the gift has now and over time.

“The view that equity release is about ‘spending the kid’s inheritance’ is clearly far from the case for many customers, who actively use the money to provide an early inheritance at a time when they believe the money will have a greater impact on their families’ financial wellbeing.”

Key Retirement’s statistics came as HM Revenue and Customs deadline for comments on issues with the new residence nil-rate band approaches.

This year’s summer Budget saw the Conservative government announce it will phase in a new residence nil-rate band (RNRB) from 6 April 2017, allowing property to be passed on to a direct descendant.

The tax office has set the deadline for receiving comments on concerns about how the RNRB will work as Friday (16 October).

Julia Rosenbloom, director in private client tax services at accountancy Smith and Williamson, said what has not been so far highlighted by the tax office, is that these plans could necessitate individuals retaining important documentation and accurate records well in to their later life.

ruth.gillbe@ft.com