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Fixing up homes shapes the equity release market

New figures from Canada Life reveal that home improvements were the most popular reason to take out equity release in 2018, with almost half (48%) of customers using some of the funds unlocked from their property towards enhancing homes and gardens.


The data, based on Canada Life’s customer information for 2018 , shows a slight rise in the number of customers who used equity release for home improvements in Q4 2018 (47%) compared with the same quarter in 2017 (46%). Although these figures did not reach the high of Q3 2018 (50%), home improvements continue to be the most popular use for equity release.


Last week’s figures on family spending by the ONS revealed that 50-74 year olds spent almost a quarter (23%) of their total weekly housing expenditure on home alterations and improvements in 2018.


Of the 47% of Canada Life customers who used equity release to improve their home or garden in Q4 2018, over a third (37%) used the home finance product for improvements adding value or extra enjoyment, such as extensions or conservatories. The remaining 10% used equity release for accessibility improvements that made their homes safer or more comfortable, such as stairlifts or wheelchair ramps.


Alice Watson, head of marketing and communications at Canada Life Home Finance, said:


“These figures demonstrate the flexibility of equity release as a tool for financial planning in retirement, both as a means to unlock wealth in the immediate term and with a view to the future."


“It is significant how many people are untapping the value of their property to fix-up their home, or increase their comfort and security as they grow older. This significance is even clearer when seen in the context of the latest data from the ONS, which shows the amount spent by 50-74 year olds on alterations to their house is at its highest level since at least 2015."


“Taking out equity release to fund home and garden improvements benefits more than just the current occupiers. Such enhancements can add value to the property and help pass on wealth to future generations.”


Canada Life’s data shows that the second most popular use of equity release in 2018 was to clear existing mortgages (38%). The biggest year-on-year shift was in the number of people unlocking the value of their home to clear a residual mortgage in Q4 2018 (44%), up almost 10 percentage points on Q4 2017 (35%).


Elsewhere, more than 1 in 4 people used equity release to manage unsecured debts in 2018 (26%). Last year’s final quarter figure for unsecured debt was also the same as 2018 as a whole, rising slightly from 25% in Q3 2018.


Other popular uses for equity release among UK households in 2018 was holidays (22%), day to day living (21%) and gifting to family (16%).


Alice Watson continues:


“These figures also show the significant number of retirees that are taking out equity release to consolidate existing debt, which has long been a popular use of the home finance product. Alongside the number of customers gifting to their family and using equity release to make improvements to their home or garden, these are signs that more people are aware of the intergenerational benefits of equity release."


“As the Equity Release Council figures last week showed, the equity release market is going from strength to strength. We fully expect the market to keep growing and customers to continue to diversify their reasons for using equity release.”

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Canada Life Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority.

Canada Life International Limited and CLI Institutional Limited are Isle of Man registered companies authorised and regulated by the Isle of Man Financial Services Authority.

Canada Life International Assurance (Ireland) DAC is authorised and regulated by the Central Bank of Ireland.

Stonehaven UK Limited and MGM Advantage Life Limited, trading as Canada Life, are subsidiaries of The Canada Life Group (U.K.) Limited. Stonehaven UK Ltd is authorised and regulated by the Financial Conduct Authority. MGM Advantage Life Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority.