As a result of rising property prices, retired homeowners have amassed £596bn in property equity. There is also massive potential to utilise this through equity release products, according to research from IFA Key Retirement Solutions. It said that, despite high levels of equity, 40% of people in retirement have incomes low enough to qualify for means tested benefits.
Dean Mirfin, business development director at Key Retirement Solutions, said: ‘Of those in retirement already, 20% say they believed they would eventually use equity release products, but at the moment the equity release sector is only selling to 1%, it is a market waiting to burst open.’
The findings reveal the average retired person bought their current home in 1980, at an average price of £23,287. With an average price now of £106,406, average equity stands at £83,119. The equity release standards body Safe Home Income Plan’s figures show the average amount released as £46,100 during the last quarter of 2002.
‘When people retire they may have a tax-free cash bonus or savings, and there is a period where they do not see a drop in income, but as the population ages we will see more taking out equity release. This country already has 2.3m pensioners (25%) officially classed as living in poverty. Equity release will become a major line for mortgage intermediaries,’ said Mirfin.