Equity Release Loans See Increase
More and more retired people in the UK are now looking to release the cash which is tied up in their home by taking out an equity release loan, according to the latest figures from the industry trade body Safe Home Income Plans (SHIP).
The number of equity release loans offered to retired home owners, experienced its largest growth for more than two years in the three months between July and September this year, with an increase of 4 per cent, to give a total of £205 million worth of new loans during this period.
Previously, lump sum loans were the most popular option for equity release loans, as people wanted the money for luxuries, home improvements, or to pay off other debts such as personal loans and home owner loans or mortgages.
However, SHIP say that there has now been a shift in how people want to take their funds from an equity release loan, with a more than half of all loans now being taken on a drawdown basis, rather than a single lump sum loan.
This method of drawdown will allow the equity in a person’s home to last longer and also the balance of the loan will not increase quite as quickly. This change shows that more people are looking to use their home to provide an income, probably to replace lost income from low interest rate savings accounts.
Andrea Rozario of SHIP said “With the current economic turmoil and resulting consumer uncertainty, many consumers favour drawdown mortgages which allow them to gradually access the equity in their homes.”
“This quarter’s figures provide us with a strong platform for growth in the remainder of 2010 and a firm foundation on which to expand the market in 2011. In addition, cuts announced in the recent spending review will hit all sectors of the population and may lead to more people seriously considering equity release.”
