Clearing an existing mortgage was most popular reason for equity release

Michael Lloyd

July 17, 2019

Clearing an existing mortgage was the most popular reason for taking out equity release in the first half of 2019, Canada Life has found.

More than two in five (44%) customers used the wealth stored in their homes to pay off residual mortgage debt. And amidst ongoing Brexit uncertainty, a growing number of people are using equity release to build a financial buffer.

Alice Watson, head of marketing and communications at Canada Life Home Finance, said: “These figures demonstrate the flexibility of equity release as a tool for financial planning in retirement.

“While a large proportion of customers are looking to safeguard their financial future by paying down debts and increasing the value of their home, others are using equity release to improve their lifestyles, paying for home improvements and enhancing their quality of life now.

“Notably, the data finds that more customers are using their property wealth to build up their emergency fund, with 8% of lifetime mortgages ring-fencing some of the money released for this purpose in 2019 compared to 6% in 2018.

“However, more than one in five (22%) equity release customers are using equity release to pay for holidays, which is an increase of 1% compared to the end of 2018 (21%) and the same percentage as a year ago (22% H1 2018).”

The figures, based on Canada Life’s customer information for 2019, show that more customers are taking an initial advance to clear an existing mortgage this year since 2016 (44% compared to 46%).

The second most popular use of equity release is homeowners making improvements to their properties to generate more value and enjoyment (40%).

One in three customers are doing this by accessing their cash reserve facility (33%) and almost a third via a further advance (31%).

Watson added: “The industry shouldn’t lose sight of the significant numbers of customers who are unlocking their property value to improve their way of life. It has enabled people to enjoy trips of a lifetime and make lifestyle enhancements that wouldn’t be possible without equity release.

“As political, economic and social changes seem to be continuing at breakneck speed, we can be sure that the profile of the lifetime mortgage customer will evolve with the times.

“It’s crucial that the industry remains alive to these developments and continues to offer customers the flexibility and security they are after.”

Simon Stanney, equity release director at SunLife, said: “Analysis of our own sentiment data* and the Equity Release Council’s latest lending figures suggests that, while paying off mortgage debt is the most popular reason for younger equity release customers (55-64), overall, home improvements are the most popular reason.

“According to our data, which looks at consideration of equity release, the most popular reason why people consider taking out equity release is for home improvements, with 24% stating this is the reason, compared to 14% who say they would use the cash to repay mortgages or secured loans, and one in ten who would take out equity release to repay other debt.

“Over a quarter say they would use the money for either holidays or a new car, while just under one in 10 say they would gift the money.”

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