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Equity release loans are rapidly growing in popularity across the UK as many homeowners either approaching, or already in retirement, take advantage of the value tied up in their properties to help fund their retirement plans and as interest rates on savings continue to fall and pension funds drop in value, thereby reducing people’s retirement income further, equity release loans, or lifetime mortgages are likely to become even more popular in the future.

But what do the majority of people spend their money on, once they receive the funds from their loan?

A recent survey from Key Retirement Solutions (KRS) has shown that the main uses of an equity loan are to carry out home improvements (63 per cent) and to repay existing homeowner loans and other debts (57 per cent), where the property value is less than £200,000. 40 per cent of people in this price group also use the money for holidays.

In general, lower property values and younger loan applicants use the funds for these purposes, but older people and those with higher valued houses (£750,000 plus) are more likely to gift at least some of the money to their families, possibly in an attempt to reduce their liability for inheritance tax.

Younger borrowers in the age range 60 to 64 are most likely to use the equity release loan to repay their existing loans, whilst those living in the North are most likely to help out their families, or make home improvements.

Dean Mirfin of Key Retirement Solutions said “The most popular reasons at all ages do not come as a great surprise, being home improvement, repaying debt and holidays. Whilst few appear to release equity for extra monthly income, many incomes are directly improved by the repayment of debt.

The figures continue to show, that for the many thousands in or approaching retirement, the need and desire to release equity is targeted at those outcomes which will have a dramatic, positive effect on their standard of living.”