Consumers are hostile towards equity release despite having a lack of understanding about the products available, a report from the Tax Incentivised Savings Association reveals.
Just 14 out of a 1,000 over-50s plan to use equity release as a means of boosting their retirement income according to the report.
Many don’t understand how the products work despite four in five (80%) thinking they do, as consumers typically answered just three out of 13 true or false questions correctly on equity release.
Despite consumers’ apparently hostility the report found that 68% plan to use housing to fund their retirement in some way – presumably by downsizing.
Simon Chalk, technical director at Age Partnership, said: “I find it hard to believe that so few people would consider using equity release.
“We have an uphill battle getting people to understand what modern equity release contracts look like.
“We are still dispelling myths daily that you are giving up ownership of your property and that your children will inherit a debt – they cannot.
“You can’t ask people if they would take out equity release without explaining the product. Once people understand how quickly their assets will deplete to zero they will take it into account.”
He thinks the term ‘equity release’ has unfortunate connotations.
He added: “People would be more positive if you use the terms like a lifetime mortgage or drawdown mortgage.
“When it comes down to it most people don’t want to move and in retirement they want to enjoy themselves.
“Just to dismiss it out of hand is like anything in life – it’s a foolish concept.”
Andrea Rozario, chief corporate officer at Bower Retirement, added: “Downsizing is not the best option for many.
“Equity release customers are on average taking around £70,000 in cash from their homes which isn’t easily achieved through downsizing while many do not want to move away from family and friends in retirement.”