New figures have highlighted the appeal of using housing wealth to help fund later life and it’s becoming a more ‘accessible’ option to people, a residential property law expert said today.
The Equity Release Council, which Birchall Blackburn Law is a member of, revealed that lump sum lifetime mortgages had the biggest quarter for lending in a decade between July and September this year.
Lump sum lifetime mortgages are often used for one-off payments such as clearing outstanding mortgages or other debts in addition to funding home improvements, travel or providing a living inheritance.
The total value of lump sum lending rose by more than a quarter (26%) between Q2 and Q3 2016 from £208.8m to £264.1m. This was up by 44% year-on-year and is the largest amount for more than a decade.
Meanwhile, drawdown plans – which provide customers with the option to release housing wealth in a number of instalments and can help meet smaller costs or boost retirement income over a period of time – accounted for 62% of new plans in Q3.
The 4,632 new drawdown plans taken out in Q3 2016 was the highest number seen since this type of product appeared on the market.
Michael Foxford, partner at Birchall Blackburn Law, said: “These latest figures do highlight that equity release is becoming a popular choice amongst homeowners.
“There are many people right now who will be taking their first step on the housing ladder and this shows if they keep up with their repayments and pay of their mortgage – which is what people want, a home they can call and make their own – then it’s an accessible option if they need to go down this avenue in later life.
“People work hard over their life time to pay off their mortgage in 25 years, and that culture means their home is where their wealth is tied up. What it could mean for the market eventually remains to be seen.”