The spiralling cost of homeownership in the UK has continued to see many priced out of the market, with those fortunate enough drawing on the bank of mum and dad as the only option in getting that first foot on the ladder. However, research by leading online estate agent, Emoov.co.uk, has found that it isn’t just those at the start of the property ladder struggling to get by in the current economic climate, but also those in the later stages of life are having to draw equity from their property in order to survive.
There has been a dramatic increase in people over the age of 55 drawing on the equity of their property in order to get by. £17bn of funding has been provided to 350,000 homeowners since 1991, a third of which has been released in the last five years alone.
What is Equity Release?
Equity release plans are long-term agreements based on indefinite terms that often last until the customer either moves into care or passes away. There is no payment required or interest due on the amount paid out until this point, and an equity release provides better long-term security than a residential mortgage.
Who is Drawing Equity on their Property?
During the second half of 2015, the Equity Release Council recorded that homeowners aged 55+ across the UK released housing wealth to the tune of £898m, the largest of any half year on record which brought the total to £1.61bn, which is the highest previously seen.
The figures also show a notable increase in those 85+ taking out equity release, accounting for 5.9%, nearly double that of 2014. The data suggests that for many, the cost of living coupled with the repayment of their mortgage means their private and state pensions are inadequate. Additionally, equity release provides a source of income to fund this as well as home care and other costs incurred during retirement.
Depending on whether they opt for a drawdown release or a lump sum, equity release customers across the UK are able to boost their finances by between 109 and 179 week’s full-time take home pay, taking an average of £49,607 in equity through a first drawdown withdrawal, or as much as an average of £81,324 in one lump sum.
This is of course highest in London where the average lump sum increases to £209,739, falling to £102,184 in the South East and £78,531 in the South West. The lowest amount on offer across the UK is in Scotland where the average lump sum reaches just £39,384.
There has been a dramatic increase in the number of over 55s, particularly those 85 and above, having to draw equity from their property in order to survive due to the ever inflating cost of living in the UK.
Although record low-interest rates are good news for those struggling to get on one end of the ladder, it’s not the case for those at the other end who have seen the interest accrued on their life savings dwindle with the cut in rates.
With savings rates ever lower, it’s evident that income from pensioner’s savings is under pressure and therefore necessitating that ‘grey’ equity within such housing is being increasingly turned to in order to make ends meetRussell Quirk