In recent years, equity release (ER) — a range of products (consisting of lifetime mortgages and home revisions) that allows you to access the equity you have in your home under certain conditions — has surged in popularity.
This does not constitute advice and advice should be sought in all instances before acting on it.
In the first six month of 2018, around £9.5 million of equity was released from property every day.
However, financial experts don’t necessarily agree on whether or not the traction that equity release has gained over recent years will continue, or if the potential downfalls will inevitably outweigh the benefits for consumers.
Darren, our Equity Release specialist shares some thoughts…
It’s easy to see why equity release is experiencing a renaissance recently.
The perfect storm of longer life expectancy, rising cost of retirement, and increasing levels of debt all contribute to the appeal of ER. For many, property is the only real resource they have at their disposal – and equity release is a valid form of providing cash during retirement.
However, ER is not just good for retirement — it also has other uses, such as during tax planning, debt consolidation, home improvements, or gifts to family members — because it provides cash in hand that can be put toward any worthwhile endeavour.
When is equity release the right choice?
ER is currently still quite the niche concept. A lifetime mortgage or home revision works for individuals who know they have wealth in their property but are concerned that their pensions and savings will fall short in helping them continue their lifestyle during retirement, or if unforeseen health issues arise that threaten to eat away at your savings.
But industry professionals predict more and more people may make use of equity release and under the right conditions, the market may boom. The baby boomer generation may not be financially equipped to deal with retirement – due to lack of foresight, unaffordable or un-renewable mortgages, or plain old poor planning.
Since the baby boomer generation consists of millions of people that are rapidly approaching retirement, it stands to reason that a fair percentage of the population may not have prepared well enough and will seek alternative means to get them through retirement.
What is stopping people taking advantage of equity release?
While ER could be a great opportunity for many, there still needs to be a few factors that fall into place before it truly experiences its moment in the sun.
Firstly, it needs to overcome the societal stigma against releasing equity in your home and pride in outright home ownership.
Secondly, the standards on the products must remain high to shield and encourage consumer use. It’s also extremely important that financial advisors welcome ER as a viable option and become knowledgeable about the products and services offered.
Finally, for ER to well and truly boom, the market needs to innovate and grow; more providers need to offer competitive and quality products in order to attract new consumers.
Is equity release a viable option for you?
With all these elements in place, we’re confident equity release could indeed become a real player in the market and enjoy a place amongst the age old retirement and savings options.
If you’re interested in seeing if equity release is right for you, don’t hesitate to get in touch Darren, our specialist in Equity Release.
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Dental & Medical Financial Services have been helping doctors and dentists to build and protect their wealth, whilst saving tax for over 25 years.