Equity Loans Likely To Double In Five Years
Equity loans, or lifetime mortgages as they are also known, look as though they are about to see a dramatic increase in popularity, largely due to the effects of the credit crunch.
One of the biggest providers of equity release home owner loans, Norwich Union, has predicted that new sales of this type of product are likely to double over the course of the next five years, from £1.2 billion currently to £2.4 billion by December 2013.
Equity loans have been available for many years now and allow people either approaching, or already in retirement to release some of the value of their home as a cash lump sum, or regular income, to help to fund their retirement, in most cases the borrower does not need to make any repayments on the loan, as the interest is rolled up and eventually repaid when the home owner either sells the property, or dies.
Equity release loan products have increased in popularity over the past couple of years already, as many people have either not made sufficient financial retirement plans, or the value of their investments have not performed as well as expected, leaving them short of funds to maintain their lifestyle.
But now, both advisers and providers are starting to see people taking out equity release home owner loans to repay their existing mortgage, outstanding personal loans and other debts, rather than use them purely for additional income.
One Independent Financial Adviser said that his company had already seen a significant increase in this area of business and that around half of all cases were being used to repay other personal loans and credit card debts.
There has already been a large increase in the number of companies providing equity release loans and it is likely that this number will grow, as the popularity of the product increases over the coming years.
