One in three UK mortgage holders would consider equity release as a way of raising cash if they didn’t have to sell their property or downsize, according to research from investment, protection and retirement specialist LV=.
The 16th edition of the LV= Wealth and Wellbeing Research Programme – a quarterly survey of 4,000 UK adults – shows that 18 to 34-year-olds are more open to unlocking capital from their homes than those aged 65 or over if it means they don’t have to move.
Of those surveyed:
- Almost half (44%) of those aged 18 to 34 would consider equity release such as a lifetime mortgage.
- Only 8% of people aged 65 or over would consider equity release.
The data suggests traditional attitudes towards equity release are changing, with young people more likely to consider accessing cash tied up in their property.
The research from LV= also shows that mortgage holders are most likely to consider equity release to cover unforeseen costs in later life (15%), or fund health or care requirements when they’re older (11%).
Meanwhile, 8% of those surveyed said they’d use the money from equity release to top up their pension income, 7% would use it to help friends or family financially, and 8% would enhance their lifestyle with regular holidays.
However, the data shows UK consumers are becoming more cautious, with around 9% more people saying they want to delay before applying for equity release. Similarly, around 56% of those who would consider a lifetime mortgage say they would prefer to wait until interest rates improve.
This rises to almost two-thirds of those over 55, suggesting people want to gain maximum benefit from their assets when they retire.
The LV= study also shows home ownership in retirement may be in decline amidst the changing financial landscape.
The research reveals that 3 in 10 of those surveyed don’t think they’ll have paid off their mortgage before they reach retirement age, and for those who retired with a mortgage, equity release has become a more popular way to pay off their home, up to 1 in 14 from 1 in 25 a year ago.
At the same time, one in five people said they don’t plan to buy their own home; a figure that jumps when you ask renters (over half) and people who live alone (a third).
According to the LV= report, people approaching retirement age are exploring various ways to fund their lifestyles and save for their future such as Individual Savings Accounts (ISAs).
Overall, 62% of people aged 55 to 64 said retirement planning was a goal compared to only 22% of 18 to 34-year-olds. When contributing to an ISA, this younger age group is more likely to save for a new home than for retirement.
Overall, the LV= study discovered the implications of tax-free withdrawals from pensions are not widely understood – 25% of people who haven’t yet retired don’t know how much tax-free cash they can take from their pensions, and only 4 in 10 people do.
Having the right retirement planning and advice can help people make important changes to their pension savings to help them in later life. For instance, equity release provides financial flexibility by allowing mortgage holders to access funds for various reasons such as home improvements, paying off debts, or investing in new ventures, all while staying comfortably in their current property.
David Hynam, Chief Executive of LV=, said:
“We found that attitudes towards funding retirement seem to shift by generation. For property owners, there is a trend away from entering retirement mortgage-free.
“Additionally, this wave of data suggests there is greater interest in exploring equity release as a way of unlocking capital in property from the self-employed and younger customers.
“When it comes to funding retirement, we always stress the importance of seeking professional financial advice.”
