Equity ReleaseJul 13 2017

Equity release boom forecast from interest-only timebomb

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Equity release boom forecast from interest-only timebomb

The maturing of interest-only mortgages taken out around 25 years ago is expect to boost sales of equity release, according to Key Retirement.

By the end of the year the equity release specialist predicts the amount of money pensioners will be borrowing from their home to pay debts and fund home improvements will hit £3bn, compared to £2.1bn in 2016.

Total sales of equity release plans have grown 44 per cent to 17,656, compared to 12,246 in 2016.

The biggest reason for equity release was home improvements, which accounted for 64 per cent of lending.

The average outstanding mortgage was £85,516; mortgage repayment accounted for 23 per cent of equity release lending in the first half of 2017, compared with 17 per cent in the same period of 2010.

Dean Mirfin, Key Retirement technical director, said the first wave of interest-only mortgage maturities would take place between 2017-2020, with the next set to occur in 2028.

He added that the mortgages maturing now usually had a lot of equity in them, as the homeowners typically borrowed little to nothing over the lifetime of the mortgage.

He claimed not enough of these pensioners are being shown the value of equity release.

Mr Mirfin said: “These people need helping now. They are the most disenfranchised but are the easiest to help because they have not taken out loans.”

The report added: “Those with shortfalls or no repayment method in place have little or no little time left to plan for their interest-only mortgage exit.

“Despite data showing that few borrowers are being re-possessed, what is clear is that we will see that too many are repaying their mortgages through an unwanted house sale rather than a wanted home move.”

When it came to non-mortgage debt, 30 per said they wanted to use some of their equity for non-mortgage debt, up from 29 per cent last year.

Every region across the country experienced growth both in the total number of plans and in overall lending, with Northern Ireland and the South West seeing big growth.

Ima.JacksonObot@ft.com