Equity release funds currently account for one in every £90 spent by retired people in the UK, according to the study which estimates retirement spending funded by equity release will rise above £4bn per annum by the end of this year.
The number of new homeowners turning to equity release is predicted to rise by more than a third in the next 10 years and one in five prospective equity release customers expect to use the fund to finance care-related expenses.
The Cebr estimated the share of total property wealth held by over 65s has increased from 28 per cent to 37 per cent over the past 12 years.
An increase in property prices has meant one in 20 homeowners have used equity release to fund retirement, a figure the Cebr anticipated will double to one in 10 based on the anticipated plans of younger homeowners.
The Cebr’s housing forecast found that the average amount of equity released will rise above £170,000 within the next five years, even if there is a slowdown in the housing market.
The total amount of equity released from property is expected to double by 2030 to over £12bn, as customer numbers increase and the average amount of equity released grows.
One in four retired homeowners also cited having accessed their property wealth through a means other than equity release, for example, remortgaging, downsizing or taking out retirement interest-only mortgages. Almost a third of this group accessed property wealth to finance home improvements or renovations.
Equity release funding everyday spending
Occasional big purchases such as home improvements, furniture or even a new car, accounted for £1.9bn of equity release funds spent. Other uses included day-to-day expenses, such as such as food, clothes, transport and entertainment which totalled £1.3bn. The remaining equity, £480m, was used for international holidays and financial planning.
Craig Brown (pictured), chief executive of Legal and General Home Finance, said: “Our report highlights that homeowners are increasingly planning to use equity release or other ways of accessing property wealth to help fund later life.”
“This shift reflects the boom in property values, which have made our homes such an important asset, but it also demonstrates how far the equity release market has come through the introduction of product innovations and how it has become a more suitable solution for a wider range of people. It has always been Legal and General’s view that changing customer needs and attitudes would see equity release transition from specialist product to a mainstream option. The impact of the equity release market is more significant than just the spending power it gives to customers, it also makes a positive contribution to the UK economy.”