Gifting cash earlier in an individual’s lifetime is becoming more commonplace, due to the impact of the pandemic, according to Claire Singleton, chief executive of Legal & General Home Finance.
An estimated 47% of Legal & General’s customers looking to release equity choose its Optional Payment Lifetime Mortgage (OPLM), noted Singleton.
OPLM allows an individual to pay some, or all, of the monthly interest, which could reduce the overall cost of the loan.
Making optional partial repayments will reduce the amount of interest that will accumulate over the term of an individual’s lifetime mortgage.
Singleton said: “We are increasingly seeing customers turn to OPLM when using equity release for gifting purposes, as it allows them to service the interest on their loans.
“As gifting cash earlier in our lifetime becomes more commonplace following COVID-19, I’d expect this trend to continue and to see OPLM become the go to product for customers in this scenario.”
Further research conducted by Legal & General shows that 5.5 million older family members expect to provide additional financial support to younger members as a direct result of COVID-19.
The data displays that 15% of the older generation estimate they will provide an additional sum of £353 in financial aid, meaning £1.9bn could be given to younger family members needing financial support through the pandemic.
Singleton explains that she has seen an increase in the number of customers using OPLM in relation to the uptick in intergenerational gifting.
She added: “We have seen a rise in customers using the product for this reason, with nearly a third (31%) of all gifting applications this year using OPLM, up from around a quarter (24%) last year.”