Number of borrowers using equity release to repay mortgages up 58%

Fewer customers are using equity release to meet cost of living expenses or as a source of emergency funds, according to new figures from Legal & General Home Finance.

New customers using lumps sums for living expenses decreased by 16% from last year to just 10.4% and customers taking additional drawdowns for this purpose fell by 9% to 19.6%. New customers using lumps sums for emergency funds fell by 12% from last year to 18.6% and 19% less customers took additional drawdowns for this purpose (6.2%).

Meanwhile, there has been a significant increase in the number of customers using the equity in their homes to help strengthen their financial position. Customers using lump sums to repay mortgages increased by 58% since 2023 (38.9% of customers) and a quarter of all customers used these funds to consolidate their debts, an increase of 18% on last year.

Similar research from Pure Retirement also saw an increase in customers using lifetime mortgages for debt repayment. Home improvements and debt repayment are tied as the top primary reason for releasing funds among new lifetime mortgage customers.

50% of those who took out new plans with Pure over the last quarter did so for one of those two reasons, split evenly at 25% each. While the proportion of people using equity release for home improvements has stayed constant on both a year-on-year and quarter-on-quarter basis, debt and mortgage repayment has seen a 4% quarterly increase and a 3% rise from the 22% seen in Q2 last year.

Among drawdown customers in isolation, home improvements continue to be the primary reason for releasing funds, sitting at 27%, while debt and mortgage repayment continues to remain the second-most popular reason at 19%.

Lump sum customers continue to use released funds for more needs-based reasons; debt and mortgage repayment is the most popular use among this particular customer segment at 30%, representing a significant increase.

Lorna Shah, managing director of Legal & General Retail Retirement, said: “Our data over the last year shows a greater number of homeowners are using their property wealth to achieve longer term goals, such as paying off mortgages or other forms of debt.

“As the market continues to stabilise, and as more homeowners take a holistic approach to their later life finances, we anticipate equity release will move further into the mainstream.

“As a lender, we are continuing to anticipate the needs of customers and bringing innovation to the market, such as the introduction of our payment term lifetime mortgage in 2023, to give a broader range of solutions to people who might benefit from making better use of their property wealth.”

Pure Retirement’s CEO, Paul Carter, commented: “These figures continue to underline the importance of offering a holistic product offering that can cater for both aspirational and needs-based borrowing, with primary borrowing reasons now evenly split between home improvements and debt repayments. The divergent borrowing habits of lumpsum and drawdown customers similarly emphasise the different roles these types of products offer, and the varying needs they can cater for."