Well-to-do, elderly – and eager to borrow more

Changes to pension rules and a rise in death duties prompt the wealthy elderly to take on mortgages, says Sam Brodbeck

Once seen as a last resort, the use of specialist, later-life mortgages is increasingly common among well-off homeowners keen to fund “living inheritances” and avoid death duties. The proportion of £500,000-plus properties being used for “equity release” – as this borrowing is generally termed – has risen at some specialist firms by as much as three times since 2012.

In part this surge has been driven by the booming housing market, particularly in London and south-east England.

However, the growth in the value of the average property used to withdraw cash using equity release or “lifetime mortgages” has far outstripped national house price rises – suggesting that equity release is going “upmarket” as wealthier people embrace it as a broader financial planning tool.

House prices across the country rose by an average of 12.6pc between 2014 and 2017, according to figures from Nationwide Building Society, compared with a 26pc rise in the value of the average house used for equity release (see graph on Page 4).

“The increase in the numbers of wealthier, older homeowners extracting cash from their homes through equity release is testament to the fact that those with considerable property wealth are looking to utilise it,” said Dean Mirfin of Key Retirement Solutions, a specialist adviser.

The pension freedoms, a series of