The most common reason for taking out equity release also revealed
Wealthier borrowers are twice as likely to gift the proceeds of equity release, while less affluent borrowers are looking to repay unsecured borrowing, boost their income, and age-proof their homes, according to a new study from equity release lender Standard Life Home Finance.
The lender’s research, which collated 503 responses from those over the age of 55 who have considered equity release and those who have taken out a plan, has highlighted the impact of customers’ income on how they use the proceeds of housing equity.
The most common reason for taking out an equity release plan across all income brackets was to age-proof their homes or undertake essential repairs. However, 43% of those with an annual income of up to £20,000 used equity release for this purpose compared to only 31% of those with an annual income of over £60,000.
The proportion receiving more than £60,000 per year using equity release to provide financial support for family or friends was almost twice as many, at 29%, than those with incomes up to £20,000 at 15%.
The research also showed that there was a greater proportion of people on higher incomes using equity to repay mortgages - 42% of those with over £60,000 in annual income versus 33% of those with under £20,000. This was also the case for estate or inheritance tax planning, with 18% versus 1% respectively.
The equity release lender also noted that while the relative wealth of the customer played a role in how the equity was used, the value of the home is also likely to play a role with more affluent customers likely to have more potential funds to access.
“Equity release has always been a multi-use product, with customers often choosing to use their housing equity to fulfil a range of needs and desires,” Kay Westgarth (pictured), director of sales at Standard Life Home Finance, commented. “This research highlights the positive impact that these products can have on people with a range of incomes.
“Whether you are wealthier and want to support your loved ones, or less affluent and looking to clear your unsecured borrowing and boost your income, there are many options and product flexibilities. As we start to see green shoots in the market with lower rates, higher LTVs and better product availability, we anticipate that the 30% of people who put off making a choice will once again consider whether equity release is for them.”
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