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Surge in homeowners improving their futures via equity release

New figures from Canada Life reveal that clearing an existing mortgage was the most popular reason for taking out equity release in the first half of 2019, with more than two in five (44%) customers using the wealth stored in their homes to pay off residual mortgage debt. And amidst ongoing Brexit uncertainty, the new data reveals that a growing number of people are using equity release to build a financial buffer.

The figures, based on Canada Life’s customer information for 2019, shows that more customers are taking an initial advance to clear an existing mortgage this year since 2016 (44% vs 46%). The 2019 data also shows a seven percentage point rise on half-year 2018 data (37%), suggesting a rise in the number of interest-only mortgages reaching the end of term.

The second most popular use of equity release is homeowners making improvements to their properties to generate more value and enjoyment (40%). One in three customers are doing this by accessing their cash reserve facility (33%) and almost a third via a further advance (31%), illustrating the significant number of customers using their property wealth to improve their lifestyle and increase their property’s value.

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. While a large proportion of customers are looking to safeguard their financial future by paying down debts and increasing the value of their home, others are using equity release to improve their lifestyles, paying for home improvements and enhancing their quality of life now.”

Notably, the data finds that more customers are using their property wealth to build up their emergency fund, with 8% of lifetime mortgages ring-fencing some of the money released for this purpose in 2019 compared to 6% in 2018.

However, more than one in five (22%) equity release customers are using equity release to pay for holidays, which is a one percentage point increase compared to the end of 2018 (21%) and the same percentage as a year ago (22% H1 2018).

Alice Watson continued:

“The industry shouldn’t lose sight of the significant numbers of customers who are unlocking their property value to improve their way of life. It has enabled people to enjoy trips of a lifetime and make lifestyle enhancements that wouldn’t be possible without equity release.

“As political, economic and social changes seem to be continuing at breakneck speed, we can be sure that the profile of the lifetime mortgage customer will evolve with the times. It’s crucial that the industry remains alive to these developments and continues to offer customers the flexibility and security they are after.”

Source: The data in this release is taken from Canada Life’s quarterly customer survey of reasons for taking out equity release loans for 2019. Customers can cite more than one reason for taking out a loan, hence why percentages add up to more than 100%.