05 Jun, 2019/ by Homeward Legal /Equity Release
One in five homeowners who uses equity release to access some of the value of their property is now using that cash to boost their retirement finances.
New figures from Canada Life Home Finance show that 21 percent of lifetime mortgages taken out by their customers were used partly or solely for daily living expenses.
That's up 5 percent on the 2017 data, reflecting the growing equity release market.
Record numbers accessing home value
The latest figures from the Equity Release Council revealed that a record 82,000 UK homeowners used equity release in 2018, up a quarter on the previous year.
Acocrding to Canada Life's Retirement Sentiment Index, a third of those who took out their lifetime mortgage did so because of rising concerns about the cost of living. They said they needed more than £1,400 a month to cover their expenses.
Alice Watson of Canada Life Home Finance said: "The growth in customers using lifetime mortgages as income during their retirement reflects the extent to which equity release is now viewed as a practical option for retirement planning.
"Alongside more traditional sources of income such as pensions and other savings or investments, the use of property wealth is helping to boost the quality of retirement for increasing numbers of people.
"This sits alongside the dramatic changes brought in under the pensions freedoms, which made pensions far more efficient as a wealth vehicle in inheritance planning."
Offers tax efficiency
She added: "Thanks to the freedoms, pensions passed on are now taxed at the marginal income tax rate of the heir receiving them, tax-deferred if the heir keeps it in a pension rather than drawing on it, or not taxed at all if the benefactor dies before 75.
"Drawing less on a pension and instead drawing on other assets to fund retirement could allow someone to leave more money to their loved ones."
The other most popular reasons homeowners took out a lifetime mortgage with Canada Life were for home or garden improvements (47.5 percent) and to clear an existing mortgagr (37.9 percent). Loans were also used to buy a new property and to help first-time buyers.
High-quality conveyancing via Homeward Legal
Homeowners who plan to use equity release can get expert conveyancing services for the legal work required through Homeward Legal.
Our panel of property lawyers across England and Wales have the expertise required to deal with lenders in equity release.
We're open seven days, so give our team a call any time on to get a no-obligation quote on equity release conveyancing.