Bridgewater’s analysis showed that in 2009 almost 30% of customers chose repayment of the mortgage as the main reason they were releasing cash from their home, while home improvements has become an increasingly popular reason over the past three years, rising to 17% of customers last year.
Consolidating other debt came in third as most popular reason for 15% of customers.
Bridgewater asked customers on its application form to choose from a list of 15 options the one they plan to spend the majority of released cash on.
Other popular reasons for releasing equity included using the money to buy specific goods, such as a car, with one in ten customers choosing this option.
In addition, 6.5% said the money would go towards buying a holiday home or property in 2009, compared to no one using it for this purpose in 2007. A further 6.5% said the released equity would help increase their retirement income or improve their lifestyle.
However, using the money to travel or to give to other has fallen in popularity, while no customers chose to use their equity for long-term care or as an emergency fund in 2009.
Nevertheless, Bridgewater expects using equity release to fund long-term care to rise in popularity as social care policy is reviewed.
Peter Welch, head of sales and distribution at Bridgewater Equity Release, said: “In all likelihood, repayment of the mortgage, funding home improvements and debt consolidation will remain as the top choices in our figures for 2010 and we may well see an even greater number of customers using their money to either repay the mortgage or their debts. The impact of the recession and credit crunch, particularly the scarcity of mortgage funding and lender’s own diminished appetite to lend, is likely to bite further.
“That said equity is being released in greater numbers to increase retirement income and enhance a customer’s lifestyle, while a growing number are choosing to purchase vehicles and property.”
He continued: “There are clearly a variety of motives behind a customer’s decision to release equity and advisers should ensure they are completely clear on their client’s needs and circumstances from the outset. Using the equity in the home to clear the mortgage and other debts will remain strong drivers for the equity release client base.”
