Equity Release  

Consumer debt to fuel equity release market

Consumer debt to fuel equity release market

More than two-thirds of specialist advisers think equity release will benefit from homeowners’ need to pay off increased levels of debt in retirement, research has shown.

Canada Life polled 146 equity release advisers in November and found 69 per cent expected homeowners currently retiring with higher levels of debt than before will be the biggest driver of equity release demand next year.

This was more than double the 31 per cent of advisers who thought this would be a driving factor last year.

Canada Life also found nearly half of equity release customers (49 per cent) used the wealth in their homes to pay off residual mortgage debt, while a further 23 per cent used it to consolidate unsecured debts.

The equity release market has grown rapidly in recent years. In Q3 of this year, consumers released about £11m per day from their properties.

In the third quarter of 2014 a mere 5,550 consumers opted for equity release — 55 per cent less than the 11,400 five years later.

Kay Ingram, director of public policy at LEBC, said: “The experience of the market as a whole is that paying off debt has been the leading reason for accessing equity release in recent months. 

“Uncertainty created by the unresolved Brexit and the general election are leading to those who might wish to use equity release for other reasons adopting a wait and see approach.”

Alice Watson, head of marketing and communications at Canada Life Home Finance, said: “It’s clear advisers have a handle on the rising levels of debt amongst over-50s. It’s a positive sign for the industry that advisers expect consumers will turn to equity release to offer them improved financial security.”

But Canada Life also found an increasing number of people still didn’t understand equity release.

A poll of 1,016 consumers in July showed 15 per cent of homeowners would not use equity release because they did not understand it.

Ms Watson thought a higher use of equity release helped bring the importance of financial advice to the forefront, adding that using lifetime mortgages to reduce debt might not be the most appropriate solution for everyone.

She added: “In 2019, we’ve seen more consumers perceive their wealth in a holistic manner, acknowledging the role that their property can play in their financial plans. 

“However, there is more work to do – the industry must continue to show older homeowners how they could improve their retirement lifestyle by accessing the wealth stored in their home.”


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