Why is equity release becoming more popular?

Equity Release allows homeowners aged 55+(and over) to use the equity tied up in their property to help with their needs. The Equity Release Council, the industry’s governing body reported that over 90,000 people chose to access the wealth in their property in 2022, with total Equity Release lending of £6.2bn, double the amount of lending in 2017, only 5 years earlier. So, why is Equity Release increasing in popularity? One reason for this increase in popularity is that modern Equity Release products have become increasingly flexible.

Today’s products provide the option to make voluntary penalty – free partial repayments to reduce customer borrowing costs. In addition some allow customers to make regular monthly interest payments which also reduce borrowing costs.

Most products also come with fixed early repayment charges which typically reduce to zero over time which help customers if their circumstances change. Some products provide ‘Inheritance Protection,’ allowing customers to ring fence a guaranteed minimum amount of property wealth to leave behind for loved ones. Plans with ‘downsizing protection ‘allow customers to repay their plan with no early redemption charges when moving to a smaller property, whilst products with a drawdown option allow customers to make cash withdrawals in stages to reduce their overall interest costs. This flexibility gives customers more options and choices to control their finances whilst improving the quality of their lives.

Today’s Equity Release products also offer a number of important protections. Customers retain the right to remain living in their home for life with no repayment obligations and so no risk of repossession before they pass away or move into permanent care. The interest rate is fixed for life , so customers’ existing borrowing is never affected by interest rate rises. In addition, customers have the protection of a ‘no negative equity guarantee’ which means that they will never owe more than their home is worth and can never leave any debt to their families or other beneficiaries.

The flexible features of today’s Equity Release products have moved Equity Release closer to the mainstream of later life financial planning. However, they are only one option and customers should review all their options when it comes to making decisions about their finances. Many people are juggling long term financial objectives with short term financial needs, so it is important that customers consider all the alternatives, the potential impact on tax and benefit entitlements and considerations of health, life expectancy and potential future care needs.