Equity release is an option more homeowners have been turning to in recent years. It’s a wonderful way to release funds tied up in your property that you wouldn’t be able to otherwise use and enjoy, particularly in the golden years of your life.
In the first half of 2020 alone, older homeowners released £1.47 billion worth of property according to a survey by equity release specialists Key. Of course, COVID-19 had a major impact in the second quarter of the year with a 27% fall in the number of equity release customers but there is definite potential for a substantial bounce back in Q4.
How are people spending their equity release?
The Key survey found that repaying mortgages was the most popular reason for releasing equity, with 24% of all equity released being used to clear mortgages in the first half of 2020. Interestingly, however, a whopping 59% of all equity release customers chose to spend at least some of their payment on home or garden renovations and only 19% on their mortgages.
This seems to suggest that those that released equity to pay back their mortgage were paying off some pretty substantial amounts. 29% of customers, meanwhile, used their equity to repay other debts and 27% spend it on holidays. Though, given the current travel bans across much of the world due to COVID, it’s unlikely that figure is going to be rising anytime soon.
What’s changed because of COVID?
By comparing H1 2019 figures to H1 2020 figures, it’s easy to see the effects of COVID, with a drop from 22,126 customers to 19,869. It’s underlined even more dramatically when you see that, between Q1 and Q2 of 2020, the number of equity release customers fell from 11,495 to 8,374.
According to Key CEO, Will Hale: “The unprecedented circumstances the UK and the world finds itself in due to the coronavirus has been reflected in the significant slowdown in the equity release market in the second quarter.”
He does, however, remain hopeful, adding that: “Demand has remained strong as more customers look at explore how housing equity could help them support them in later life and, as we move to more normal trading conditions, we are confident that these macro drivers will ensure that we will return to growth by year-end and into 2021.”
Equity release is a big decision that should involve the whole family and should be seriously considered. It’s worth ensuring you’ve got all the facts before pulling the trigger and that you have a firm idea how and why you’ll be spending the money once it’s released to you.
Ultimately though, it’s all about freeing up funds and allowing yourself the opportunity to enjoy your retirement and see your family enjoying it. And that is truly priceless.