Equity release shows strength

In years gone by, scare-stories, a sense of shame and inadequate regulation sent the equity release service well and truly into the wilderness. Yet the situation at present could hardly be different – and once maligned lifetime mortgage products have even hit the high street. But what has changed – and is it likely to be a case of boom and bust? Over the last five years the amount of wealth obtained from property equity has continued to rise year on year. Should current trends continue, by 2020 the equity release sector looks a safe bet to surpass the £5 billion mark, making it a key factor in the future of the national economy. It is likely to become increasingly central to retirement planning, investment and inheritance tax debates, whether in the home, in the media or on the political stage.

A set of circumstances that include a pensions crisis and soaring home equity among the over-65s has resulted in a boom – creating one of the UK’S fastestgrowing financial services. Not only that, but with our ageing population either being cash poor or even falling into debt in later life, we are now seeking alternative ways to repay loans and raise capital. Indeed, it could be argued that we need to erode the ingrained feelings that outright home ownership is inextricably linked to success. Far better surely to be in a position to put that perceived wealth into something tangible?

Recent statistics would back this argument up, as despite more than one quarter of customers who took out an equity release plan last year using the funds to clear an existing mortgage, many others used the cash to buy second properties, to travel, to buy a car or even as a gift for friends and family.

With equity release plans becoming more mainstream, big banks and building societies are cashing in by introducing schemes – with Nationwide becoming the first building society to enter the market last year.

Although, it’s not just the shift into the mainstream market that has come with the growth of equity release. The buy-to-let sector has also seen positive changes to plans. Landlords who are in a tight squeeze can now avoid selling by releasing cash from their rented properties.

Thanks to new developments, key features are “future-proofing” the market by catering to a wider audience and offering flexible options. Lenders are already battling to achieve a competitive edge when it comes to bringing innovation to the market and providing consumers with choice to meet their own individual needs. With a focus on product innovation, flexibility and clear financial and legal advice, the equity release industry does not look set to slow down any time soon. And while equity release can be a useful way to release the funds that you have invested in your property, it is vital to get experienced, legal advice on potential schemes. Peter Boyd is managing director of Boyd Legal.