Taylor Scott International News
A surge in equity release activity in the UK in the second half of 2014 saw younger borrowers turning to lifetime mortgages in the wake of the Mortgage Market Review (MMR) and the 2014 Budget pension announcement. The Spring 2015 edition of the Equity Release Market Report from the Equity Release Council shows that as the market has grown, the proportion of new equity release customers aged 55 to 64 dropped from 24% in 2011 to 21% in 2013, pushing up the average customer's age towards 71. This trend continued in the second half of 2014 when just 17% of new customers fell into the 55 to 64 age bracket. However, following the March 2014 Budget and MMR implementation on 26 April, this age group made up 20% of new equity release customers during the second half of the year. Compared with the first half of 2014, the number of new equity release customers aged 55 to 64 was 32% higher in the second half of the year, which was also the busiest half year since 2008 for total new plans agreed. The average age of customers choosing drawdown products was unchanged at 71.6 from the first half of the year to the second half but the average age of those choosing lump sums fell from 68.8 in the first six months of 2014 to 67.6 in the second. The data suggests that changes in the residential mortgage and pensions markets are having an impact on the profile of equity release customers. Reports have surfaced that people are finding it increasingly difficult to access residential mortgage finance later in life under the MMR rules, particularly if the desired term may stretch beyond their normal retirement age. At the same time, many borrowers with interest mortgages are approaching their final repayment date. For those who have no or limited resources for a repayment vehicle, using equity release to pay off their existing mortgage is a common solution. Some younger borrowers may also have used equity release in the second half of last year to meet an immediate need for extra funds, rather than accessing their pension savings ahead of 6th April 2015 when the new pension flexibilities will take effect. ‘Equity release is helping people respond to a host of financial challenges at various points in later life, or simply enhance their standard of living so they can enjoy a more comfortable retirement. Part of the appeal lies in the option to cover off large one off expenses,’ said Nigel Waterson, chairman of the Equity Release Council. ‘Paying off the last of an existing mortgage is often one of the biggest financial deadlines people have to face beyond the age of 55. The flexibility of equity release enables them to wipe the slate clean while also using their housing wealth to meet a range of other needs,’ he explained. ‘The money they have put into property often proves a good investment over time. Releasing equity… Continue reading →
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