How can equity release help with the increased cost of living?

We are living in a period of time where sadly the cost of many essentials is rising fast. This is having a huge impact on millions of people but it may be of particular concern for those who are retired and are no longer taking home a salary.

As many people start to tighten their belts to ride out these tough economic times, they may be looking at other ways of funding their lifestyle or paying the bills. Figures show that more and more property owners are releasing equity from their homes to do this. The Equity Release Council (ERC) reports that in the last two years 150,653 new and existing customers have been releasing tax-free cash from their homes. Demand for new plans fell during the pandemic but during the first quarter of 2022 growth was at 21%, compared to a 9% fall in the same period last year.

David Burrowes, chair of the ERC, said: “Not only are more people considering equity release, but they are doing so for many different reasons and helping old and young alike to fund everyday costs and major life events.”

Mr Burrowes said the popularity of equity release right now can be attributed to new products offering greater flexibility and a property market where growth has exceeded inflation, coupled with an ageing population.

Those choosing to release equity may be using the money for a variety of different reasons. In previous times it may have been for holidays or home renovations but unfortunately it may now be for more everyday costs such as heating bills or council tax.

Lifetime mortgages are still the most popular type of equity release product. The standards set by the ERC mean that if you apply for a lifetime mortgage you will be protected from home repossession, interest rate rises and you will have a no negative equity guarantee. However, you must remember that the main disadvantage of equity release is that it does not pay you the full market value for your home. If you sell your home on the open market, and choose to downsize instead, you will receive more money.

The minimum age for taking out a lifetime mortgage is usually 55 and for a home reversion scheme it may be 60 or 65.

:: Use our Equity Release Calculator to work out how much cash you could release.

It is important to take expert advice on equity release before deciding whether it is right for you. Contact us to find out more from one of our highly trained advisors.