There is a clear correlation between the size of the lifetime mortgage and how the money is used, research from HUB Financial Solutions has found.
Nearly two-thirds of the funds released by customers taking the minimum amount of borrowing (£10,000) was spent on holidays/leisure (33%) and home improvements (30%).
In contrast, funds released by those borrowing the most (£330,000 or more) were mainly used to restructure their finances such as clearing a mortgage (39%) or refinancing current lifetime mortgages (25%) while 6% was spent on home improvements and 1% on holidays/leisure.
The biggest borrowers also gifted a much larger proportion of funds to family – 14% compared to just 1% for those borrowing the minimum – suggesting the importance of lifetime mortgages as a ‘pre-heritance’ option for estate planning.
Simon Gray, managing director of HUB Financial Solutions, said: “Property accounts for the most significant portion of many people’s total wealth so the ability to access it flexibly is highly valuable.
“Money people release from their homes is often used to do things which would not be possible from accessing other savings or surplus regular income.
“People borrowing larger amounts are typically aiming to improve their overall financial situation including inheritance tax planning, while those taking the minimum sums are focused more on spending on things to improve their immediate living standards such as holidays or renovations.
“The range of lifetime mortgage solutions to match the needs of customers has increased rapidly in recent years as has competition within the market.
“The arrival of new, more flexible options such as the ability to make interest payments for those customers that want to, is making it easier for advisers to design a solution that’s tailored for their clients and adaptable when circumstances change.”