Equity release hits a record high as over-55s plunder £2bn
returns from the homeowner’s estate if necessary. People are living far longer these days and retirement can last in many cases up to 30 years – which will require significant sums to fund.
“It’s time millions of people woke up to this sobering fact as the state will no longer be able to bail them out.”
The over-55s withdrew a total of £824million of property wealth from their homes via equity release plans during the third quarter of this year, according to the latest data from the Equity Release Council.
This surpassed the £701million recorded in the second quarter of this year to become the highest figure seen in any single quarter since 2002.
Added to the record £1.25billion of property wealth taken out in the first half of 2017 it means just over £2billion has been borrowed so far and the final quarter figures are yet to come.
Nigel Waterson, chairman of the council, said: “Property is, for many people, their largest asset and has the potential to play an increasingly important role in the future of retirement funding.
“As more homeowners look to housing wealth as a source of retirement finance, the council and its members will continue to ensure the highest standards of customer protection.”
The figures are seen as further evidence that people are relying on housing wealth as a core pillar of financial planning for retirement. An equity release mortgage can cost more than three times the sum borrowed after 20 years, while some schemes demand more than 70 per cent of a home’s value for just a 20 per cent advance.
Although the Bank of England base rate is at an all-time low and normal mortgage rates have tumbled, rates for lifetime mortgages – the most common form of equity release – remain high.
Equity release is still expensive compared with a conventional mortgage. A loan of £65,000 with interest “rolled up” at a rate of 6.4 per cent would become a debt of almost £137,000 over 12 years.