It’s not just retirees who can benefit from equity release

Stuart Wilson

February 24, 2020

Stuart Wilson more2life vulnerability in a digital age

Stuart Wilson (pictured) is corporate marketing director at more2life

It’s First-Time Buyers Fortnight – two weeks dedicated to empowering people to own their first home and get on the housing ladder.

However, overcoming the first hurdle of raising enough money for the deposit is often what prevents many from realising their dreams of homeownership.

High house prices, coupled with stagnant wages, means that the pockets of most first-time buyers aren’t proving deep enough to provide the hefty lump sums needed in order to secure their first home.

Schemes such as Help-to-Buy have done wonders in helping to boost the finances of first-time buyers, but in recent years we’ve also seen the prominence of the Bank of Mum and Dad (or Gran and Grandad) grow, as older relatives look to help younger generations of their family onto the property ladder.

Increasing numbers of parents and grandparents are passing on their wealth to loved ones in order to help them fund financial milestones, with purchasing a first home being one of the top reasons for doing so.

Equity release has formed a big part of this, as older homeowners unlock the cash tied up in their properties and gift a proportion of this to their children or grandchildren.

And, given that the Help-to-Buy scheme closed to new savers last year, it is only likely that this form of funding will grow in popularity in years to come.

The equity release market is well equipped to help these older homeowners transfer their wealth to younger generations. Lenders have responded to the changing needs of borrowers by developing and

enhancing their product offerings to accommodate the flexibility and choice that consumers want. For example, the number of products offering drawdown facilities – the option to withdraw money in increments rather than take out a lump sum – almost doubled in the space of a year.

In August 2018, 47 product options included this feature, but then in August 2019, it was revealed that 88 products offered this feature.

On top of this, rates in the market have reached record lows meaning there has never been a better time for parents, and children, to reap the benefits that equity release has to offer.

Across the whole of 2019, the average equity release rate fell to 4.29% AER and in January this year, with some plans, including more2life’s Flexi Super Light, offering interest rates of under 3% for the first time, marking a new record low for rates in the market.

However, for more consumers to realise the benefits of equity release for both them and their loved ones, specialist advice from suitably qualified advisers is critical.

With households over the age of 55 holding 65% of all property wealth in the UK, solutions such as equity release will be pivotal in helping first-time buyers onto the property ladder, and advisers will be well-placed to guide borrowers towards the best solution for them based on the financial circumstances of themselves and their families.

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