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Equity Release Mortgages | Potential Social Impact

Equity Release Mortgages


In the 2019/2020, 86% of initial pension withdrawals came from pots valued at less than £10,000. Even with access to a full state pension, financial strain may occur. The Pension & Lifetime Saving Association’s ‘Retirement Living Standards’ suggests a single person needs over £10,200 to meet basic needs. Therefore, individuals must explore additional income avenues for a secure and enjoyable retirement.

Property Wealth and Home Ownership

In the United Kingdom, the accumulated property wealth of those over 50 is estimated at £3.8 trillion. Among individuals aged 55 and above, 74% own their homes. Despite modest pension pot sizes, homeowners nearing retirement have likely experienced property value growth. In the past year alone, property values increased by 13.2%.

Leveraging Property Wealth

Research from The Office for National Statistics indicates that the average property value is now £266,000. Leveraging property wealth through products like equity release mortgages is beneficial. Our lifetime mortgages, with a median Loan-to-Value (LTV) ratio of just under 25%, could provide homeowners over £60,000. This sum can supplement daily living expenses and stimulate economic growth.

Economic Impact of Equity Release

We estimate that every £1 released via a lifetime mortgage generates £2.34 of economic growth. This amounts to an overall impact of £2.4 billion annually. Customers utilise these funds for various purposes, supporting diverse sectors. Whether buying a new car, funding a vacation, or covering care expenses, accessing property wealth contributes significantly to job creation and industry growth.

Home Improvements and Environmental Impact

Home improvements are a popular reason for opting for a lifetime mortgage (41%). These improvements inject £1.34 billion into the manufacturing sector and provide a £349 million boost to construction. Some customers also make long-term enhancements, such as energy-efficient improvements. These reduce CO2 emissions, addressing the housing sector’s environmental impact.

Societal Benefits and Housing Wealth

Beyond economic contributions, equity-release mortgages help address societal disparities. While concerns exist about older generations accumulating housing wealth, many use it to assist younger family members. This cultural shift helps loved ones overcome financial hurdles, leading to greater societal benefits.

Evolution of Equity Release Mortgages

In 2021, 17% of Legal & General customers accessed their equity to gift to loved ones. This highlights the evolving role of property wealth. Although equity release mortgages have gained acceptance, some potential customers remain unaware of their flexibility and benefits. As property wealth gains recognition, we expect lifetime mortgages to become a standard consideration, among other retirement products.

Future of the Market

Looking ahead, we anticipate market evolution to better cater to diverse consumer needs. Innovations will enhance the quality of life, support loved ones, and incorporate ‘green’ improvements for a more sustainable impact. As people live longer, tapping into property wealth will become vital in achieving financial goals and fulfilling retirement aspirations.

We’ve reached the end of our publication. Credit to Mortgage Finance Gazette on “Equity Release Mortgages.” Until next time, stay “Connect!”

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