Retired Property Owners Boost Equity-Release Market

More retired property owners are using some of the value in their homes to finance their lifestyles as they get older. In the first half of this year, levels of equity release amongst this group of homeowners rose by 17%. The money is being used for everything from a round-the-world trip to fitting glass balconies.

Data released by Key Retirement, a specialist finance provider for the over 55s, shows that in the six-month period £753 million was released from property owned by those who are retired. The average amount that property owners released also rose during that time. On average they took out around £68,500, which was £3,500 more than during the same period in 2014.

This increase shows that the equity-release market is expanding quickly. Those who have retired and own their home are becoming more confident about taking money from their property to finance their later years.

Benefits of Equity Release

Equity release provides property owners with a tax-free lump sum that they can then use in any way they wish. The average amount that is now released from properties is over 50% more than the value of a typical pension fund. This is not always an option that property owners take as soon as they retire. The average age of someone doing so has increased from 69 years of age in 2014 to 71 today.

It is obvious why more people are starting to see the advantages of using this money while they can. As the value of property has increased, using equity release to finance your retirement has become a more effective option. The average value of the property that is being used for equity release has increased by 9% from £249,108 to £271,248.

Reasons for Equity Release

The money is being used for a variety of reasons, depending on the requirements of the property owner and their financial situation. The majority of homeowners in this category (58%) used the money to carry out property improvements, such as installing glass balconies or creating a larger kitchen. Over a quarter (28%) used the money to finance a holiday.

Not all of these people using equity release were using it to fund their own lifestyles. They are also using the money to help friends and family, with 25% of property owners giving some of it away.

Often the personal finances of the retired property owner can dictate the reason for them using equity release. 23% of those who took equity out of their property paid off a home loan, and about 29% cleared other loans or credit cards. This can be because their income is suddenly reduced once they retire and they are struggling to make the monthly repayments.

With property prices continuing to rise, many homeowners have large amounts of equity tied up in their most substantial asset. Equity release enables them to plan better for their retirement and use the money while they can in whatever way they see fit.