Equity release could help nearly 450,000 people onto the property ladder as interest in lifetime mortgages continues to grow, according to Legal & General.
Research by the provider and economics consultancy Cebr revealed 3 per cent of homeowners over the age of 55 have taken out a lifetime mortgage this year, while a further 4 per cent are considering doing so.
Figures from the Office for National Statistics showed house prices have increased by 259 per cent over the past 20 years, boosting the equity of many older homeowners.
But with wages having risen by just 68 per cent over the same period, many prospective buyers are finding that properties are beyond their reach.
Equity release – taking cash out of a property through a loan secured on it - has therefore become a vital means of helping younger relatives onto the housing ladder.
The lifetime mortgage market has grown significantly and in 2016 reached a record-breaking £2.15bn worth of mortgages.
Steve Ellis, managing director of Legal & General Home Finance, said: “Releasing equity from a family home has the potential to play a role in tackling our housing market’s affordability crisis.
"By releasing equity using a lifetime mortgage, parents and grandparents have the opportunity to help their loved ones onto the property ladder.”
Jane Hodges, managing director at London-based Money Honey Financial Planning, said: “I strongly believe [equity release] is going to be a huge marketplace.
"People are living to 100, they may have stopped work a bit early and their children don’t have enough money to put down a deposit.
“Common sense tells you these people will need to release some of those funds for considerable time and for various needs.
“Equity release has had a poor reputation in the past, and that put off a lot of people and stopped the market in its tracks – but that has very much been changed by the organisations that companies sign up to in order to make sure they are doing it properly and make it fair for the client.”
simon.allin@ft.com
