Just under a third of Bridgewater’s customers (31%) used the cash for home improvements while 27% consolidated other debts, 19% went travelling and 12% bought or repaired their car.
Bridgewater’s customers’ were allowed to detail more than one intention for the cash they released from their home.
All of the top three reasons chosen by customers increased in popularity from 2009’s results; repaying a mortgage up from 30%; home improvements up from 17%; and other debt consolidation up from 15%.
Other uses for the money cited by Bridgewater customers included a combination of home improvements and debt consolidation (7%), to provide a gift such as funding a house deposit or wedding (7%), to fund a separation or divorce settlement (4%), to use as a savings or safety fund (4%), and improving or maintaining a lifestyle (4%).
The popularity of customers using their money to fund any long-term care needs remained low with only 1% choosing this option. Also, no customers were intending to use equity release as part of their inheritance tax planning.
Peter Welch, head of sales and distribution at Bridgewater Equity Release, said: “The three main uses for releasing equity through Bridgewater’s home reversion plans have remained the same over the past few years, with more customers suggesting they will repay mortgages, improve their homes or consolidate other debts.
“Simply put many more individuals in or reaching retirement find themselves with far higher levels of indebtedness than they imagined. With the credit crunch and recession biting hard in recent times, the older population has found it increasingly difficult to find remortgage/debt finance because of the stricter criteria placed on lending into retirement.
“With this the case, individuals are now using the equity they have stored in their properties to become debt-free which not only enables them to plan more freely for the rest of the retirement but provides security of tenure in their home for the rest of their lives. The ability to swap debt for the equity in their home can also have a dramatic improvement in the disposable income of the retired as these consumers are suffering from a ‘real’ rate of inflation far higher than the current published CPI and RPI rates.
“We have seen an increase in customers using the money to improve their homes, perhaps making them more accessible and updating them for retirement living. While there has also been an upsurge in ‘lifestyle’ uses such as travelling or purchasing a car, others are having to fund unforeseen events such as divorce/separation or gifting to offspring. With the austerity cuts starting to bite hard in many areas of the country we anticipate more customers will be using equity release to either maintain or improve their lifestyle, or in order to look after their long-term care needs which may not be funding by the State.
“The variety of reasons why Bridgewater customers’ release equity from their homes shows that reversion products can offer a solution to many different individuals in a variety of circumstances. Equity release can be suitable in many situations however customers do need to ensure they take specialist advice to make sure they are getting the right product for their wants, needs and risk outlook.”