Mortgages  

Cash for equity release rises 4.5% to £350bn

Cash for equity release rises 4.5% to £350bn

The potential amount of cash available for equity release has grown to £350bn – a 4.5 per cent increase on the first quarter – as the pension reforms and housing market has expanded.

Alice Watson, product and communications manager at Retirement Advantage Equity Release, said: “It is clear that the current size of the market – despite being on course for a record-breaking year in 2015 – is just the beginning.”

“If the rest of the UK continues to match or overtake property value growth in the South, we can expect appetite for equity release to increase. We already see a lot of customers in areas like East Anglia and Scotland”, Ms Watson explained.

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The evolution of the housing landscape was “providing income opportunities for a new generation of people adopting a more holistic approach to their retirement”, she added.

The expectation, said Ms Watson, was that the traditional South East and London-focused success of equity release would spread into the Midlands and East Anglia, as well as continuing in Scotland.

“As property values continue to increase, we expect equity release to become an even more attractive option to over-55s right across the country, as they plan how to best use their wealth in retirement,” Ms Watson said.

Her observations were based on recent survey findings from Retirement Advantage’s equity release calculator. This showed that the South East topped the regional list with a total of £72bn potentially available to over-55s, followed by £62bn in Greater London.

This came a week after provider More 2 Life launched its Premier Choice offering market-leading loan-to-value rates.

Premier Choice said its focus on medical underwriting would enable the lender to extend the LTVs available for customers with medical and lifestyle conditions, and it was now offering higher LTVs to healthy borrowers while cutting rates.

The monthly interest rate is 5.85 per cent, while borrowers can access LTVs of up to 55.5 per cent and customers who do not take the maximum cash available can guarantee an inheritance.

Adviser view

Dean Mirfin, group director of national firm Key Retirement Group, said: “I agree that there is great potential for the market, and this awareness has resulted in moves to make the products appear more mainstream among mortgage lenders. I think this will mean more advisers and consumers will understand them.

“At present, we estimate that only about 40 to 50 per cent will probably be helped by the products currently available. That leaves a potential 50 to 60 per cent in need of alternative solutions, so there is a lot of focus on how to help these customers. A significant move came last week when the Work and Pensions Committee was reviewing Pension Wise. They said it should be doing more to engage with people on their property wealth – because it is not at present.”