According to Legal & General’s Equity Economy report, conducted with the Centre for Economics and Business Research, many lifetime mortgage customers are increasingly tapping into their property values to meet their needs.
It continued that equity release currently funds £1 in every £90 spent by retired people within the UK.
Equity release drawdowns for “aspirational spending” such as holidays and travel rose to 25 per cent, up from 11 per cent in the same period last year. The lender said that this could signal a shift in spending during Q1 as travel became easier.
However, the report said that with inflation at its highest in decades, a quarter of homeowners were using their property equity to supplement their bank balances. This is up from 19 per cent in 2021.
The lender added that 12 per cent of its clients were cashing in equity to gift money to loved ones and that the figure could rise as growing financial pressure prompts older generations to try to help the younger generation.
The report said the equity release market was likely to rise above £12bn in 2030 as people use it to pay for day-to-day spending on food, clothing, transport and entertainment, as well as on bigger-ticket items like home repairs, global travel and financial planning.
Craig Brown (pictured), Legal & General Home Finance’s chief executive, said: “We are increasingly seeing people turn to their properties to achieve life-long goals, or to improve the standard of their retirement. This is especially true following the pandemic property boom, which has seen people’s homes become one of their most powerful assets. Even as the cost-of-living crisis intensifies, homeowners are using property wealth to fund aspirational spending, amid pent-up demand for holidays.”
But he warned of a shift in priorities in response to the current cost-of-living crisis.
He continued: “Many homeowners are looking to their property wealth to help bolster their squeezed incomes and build a safety net for both them and their loved ones.
“Financial advice is a requirement for equity release customers; this, along with stringent safeguards and new industry standards, has seen it evolve into a solution that should be considered along with other sources of retirement income.
“Advisers will play an increasingly important role in helping homeowners understand if equity release might be a solution to ease the current pressures placed on their finances, or to help support family members.”
