Nearly Half of Over 55s are Using Equity Release to Pay of Debts
Retirement is supposed to be the reward just before the finish line. The last 30 or 40 years of our lives are supposed to be spent doing the things we love with the people we love; not struggling to pay off a lifetime of debts and selling everything worthwhile we own to keep the wolf from the door. That’s perhaps why, according to equity release specialists Key, 41% of the equity released in 2020 was used to pay off debts of older homeowners and help fund retirement.
According to Key CEO, Will Hale: “While most people want to reach retirement debt-free, this is simply not the case for everyone – especially those who have taken out interest-only mortgages and now often face finding a substantial lump sum to repay the balance. In H1, over £500 million worth of borrowing was repaid using housing equity – allowing people to retire with confidence, without the burden of needing to make regular monthly payments or facing the prospect of having to sell their home.”
The COVID-19 factor
This is all before we take coronavirus into account. With an economic climate that seems to be getting worse by the week and a recession on the way, not to mention historically low interest rates, even more older homeowners are looking into equity release as an option.
There was a drop in demand during lockdown, as people understandably had other things on their mind, but now that we’re towards the tail end of 2020, the trend has seen a decent uptick. This is particularly true in London, where 76% use more equity than any other region to repay their mortgage due to high house prices.
What about Yorkshire?
In Yorkshire, 49% of equity release proceeds are spent on clearing debts, with 67% of that debt being mortgage-related, which is just below the 68% Great British average and just above East Anglia (66%). This shows we sit somewhere in the middle, which isn’t necessarily a bad place to be.
Is equity release right for me?
It’s not going to be the right option for everyone, with Key also finding that less than 10% of those who enquire about equity release actually go through with it. However, it’s an option that should never be written off, particularly for older homeowners. It’s all about asking the right people for advice, examining your options and asking serious questions about how it’s going to affect the inheritance for your family.
Generally speaking, equity release is all about giving you the capital you need to live comfortably and with only 28% of people planning to retire feeling like they will have enough savings to enjoy retirement, equity release could be the answer you’ve been looking for.