HNWs and surging cost of living drives increase in equity release

Cost of living

Garrett also pointed out that released equity has become a safety net to overcome the rising cost of living for some people.

“Equity release has seen a surge in popularity in recent times, particularly over the last year, but in our opinion this trend is certainly no reason for concern,” he said.

Data from Canada Life found in Q1 of this year 14 per cent of applications for equity release were made by customers looking to support their day-to-day living costs. 

Over a third (36 per cent) of applications in Q1 were from customers looking to clear the remainder of their mortgage. 

Alice Watson, head of marketing, insurance at Canada Life said: “From Q1’s results we can see that the desire to clear a mortgage continues to be a strong driver to pursuing equity release but we’ve also seen a continuous flow of people turning to equity release in order to cover their daily living expenses or consolidate debts, the demand likely being driven by the current cost of living crisis.”

In addition, research by  LV revealed 12 per cent of retirees had outstanding mortgage debt when they retired. 

More than half (56 per cent) said they used their pension to pay off their mortgage debts. While 6 per cent said they continued to do some paid work, 5 per cent downsized and 5 per cent used equity release. 

Only 4 per cent spoke to a financial adviser.

Clive Bolton, managing director of protection, savings and retirement at LV, said it was important people consult a financial adviser to find the best option for them. 

“Retirement is a major life change for people. The switch from bringing in a regular income to living off pensions and savings for the rest of your life can put a strain on finances. A mortgage is often a household’s largest monthly bill and LV’s research shows that millions of people already worry about running out of money in retirement.”

The research by LV also showed that a third of mortgage holders do not think they will have paid their mortgage off by the age of 65, while a further 9 per cent are not sure they will ever be able to pay it off.

In April, the FCA warned advisers it needed to look again at the equity release market to make sure it is working in the best interests of consumers.