CPDOct 27 2016

The current market for equity release

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      Aviva
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      The current market for equity release

      Ms Fowler says this behaviour is likely to change and the use of equity release as a debt management tool was likely to increase as the decline in final salary pensions started to impact the market. 

      She explains: “This will be amplified by shortfalls in retirement savings.” 

      “Interestingly, we see around one in five Saga customers releasing equity from their home to give gifts to family members.”

      Mr Waterson agrees: “In terms of demand, savings shortfalls and other financial challenges will leave many over-55s looking for an extra source of income in later life.”

      Andy Wilson, an equity release specialist adviser and director of Lincoln-based Andy Wilson Financial Services, says the future market for equity release was also likely to be driven by the need to pay off debt. 

      He comments: “Of course uses for equity release are wide ranging and all relate to a need to raise funds in later life but we are seeing that a more common and increasing use is to repay existing interest-only mortgages that have come to the end of their term with no means to pay them off.”

      Aviva’s recent research report - the Real Retirement Report 2016, published earlier this year, paints a compelling picture of the potential role property wealth can play in retirement. 

      According to the equity release provider’s research almost half of over-45 homeowners saw property wealth as a key part of retirement income planning. 

      More than half said they plan to use housing wealth for care costs while almost one in three have, or plan to, help younger generations of relatives onto the housing ladder.

      Roger Marsden, managing director of Aviva Equity Release, says: “A major problem faced by many retirees is the prospect of a significant shortfall in their savings.

      “Our own research suggests an average shortfall of £2300 per person, per year, although that varies by region across the UK. If you calculate the overall shortfall over that longer-than-expected average lifespan, it could mean a £55k gap. 

      “Another trend we are seeing is people using the money from equity release not only to fund things like travel or home improvements, but also to improve their quality of life by making modifications to their home to make sure they are able to stay in it for longer.”

      As Andrea Rozario, chief corporate officer at equity release specialist Bower Retirement, says: “As the generations pass you will see equity release used to fund pension income and pay off debt.” 

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