Figures for the second quarter of this year continued the expansive trajectory, with lending reaching a record high of £971m – up from £394m in the first quarter of 2016, according to the Equity Release Council (ERC).
So, how and why has this previously misunderstood and often maligned product grown so substantially over the past few years?
Well, there are a number of very good reasons for this.
No negative equity and right to retain residency guarantees offered by lenders have assuaged many lingering consumer fears.
Second, prevailing social and economic conditions, including dwindling pension proceeds, rising inflation and low savings returns, have entrenched and compounded many problems faced by people in later life and emphasised the need for alternative streams of revenue.
This is especially so with many mainstream lenders unwilling to cater to this growing constituency.
Third, in-built inheritance protection guarantees have allowed customers to earmark a percentage of their property value against future sales to provide for loved ones at a future date.
Short-term disbursements or gifts are essentially tax free, providing the client lives for seven years after this time, thereby protecting funds from the impact of death duties.
Prevent knee-jerk decisions
Nevertheless, the decision to engage with these products is a big one and will undoubtedly require prospective clients to take specialist advice before proceeding.
Indeed, according to the ERC’s Code of Conduct, all homeowners considering a lifetime mortgage are required to take advice from an independent solicitor or conveyancer before they commit to a scheme in order to “fully understand any loan they take out”.
This is an additional level of protection against ill-informed or knee-jerk decision making and an enlightening response to remaining accusations of equity release as a murky product.
