The reason for releasing equity in homes is changing

When it comes to unlocking money, that’s tied into the value of your home, there are a range of reasons why people use equity release. These include things like home improvements, a garden makeover or heading off on a dream holiday. Some people use the cash to support other members of the family, and others to make their retirement lifestyle more comfortable.

However according to our research, 37% of homeowners who took out an equity release plan in 2022 said their main reason for doing so was to clear their existing mortgage.

It’s understandable that in the current economic landscape, being free of monthly mortgage payments is a big draw. But this is a trend that’s actually been growing since 2020 – largely driven by the fact there are more retirees than ever still with a mortgage. In fact, our survey shows that there’s been an increase of over 37% in the number of our customers using equity release to clear their existing mortgage.

So what exactly is equity release?

Equity release allows homeowners, aged 55 and over, to release a percentage of their property value as tax⁠-⁠free cash, whilst still being the owners of their house. It’s grown in popularity over recent years, with £1.7bn being released from the nations home between July and September alone in 2022, according to figures from the Equity Release Council. However, this retirement finance product is not for everyone, and anyone considering it must take advice from a qualified advisor.

Why is paying off a mortgage the most popular reason for equity release?

The current cost of living crisis – including the big increase in energy bills – has left people feeling uneasy about their financial position. So it’s not surprising that equity release is being used to clear mortgage payments, freeing up more cash each month for other expenses, like food and utility bills.

We asked Andrew Morris, senior equity release adviser at Age Partnership, about his views on this trend.

“A 37% growth in people using equity release to repay their standard mortgage is huge. I would say that it’s reflective of the periods of uncertainty that people have had to deal with over the past two years. My clients have told me that they want the peace of mind of not having to make their monthly mortgage repayments, which in–turn frees up more disposable income.”

A flexible way to manage your money in retirement

Equity release plans now offer flexibility so they can be tailored to your individual financial situation. This is one of the reasons that it’s grown in demand over the last few years. Andrew explains, “Equity release plans have developed so much over recent times, meaning people have the option of making repayments on their plans as and when their finances allow, which helps to reduce the cost of borrowing. Releasing money from your home isn’t suitable for everyone, which is why we go through a detailed review with every client to make sure that it’s the right solution for them.”