Home improvement found to be the fastest growing reason for equity release

According to the findings, repaying a mortgage is the most popular reason that over 55’s have released equity over the last six months, with an average of 21.1% of completed cases planning to pay off an existing mortgage with the money released.

Home improvements came in second, with an average of 17.9% of borrowers raising money for a renovation project.

Debt consolidation is the third most common reason for equity release, at a slightly lower average of 13.7%. Interestingly, when looking at the data by month, using equity release for debt consolidation peaked at 18% in December 2022.

The data also reveals which reasons for equity release have increased in popularity over the last six months, with home improvements seeing the biggest increase, growing by 7.7%.

Interestingly, gifting money is becoming an increasingly popular reason to release equity too. In the last four months alone, gifting money that has been released through an equity release scheme has risen by 2%.

Top reasons for equity release

1: Repay mortgage
2: Home improvements
3: Debt consolidation
4: Supplement income
5: New/second home purchase

Mark Gregory, CEO and Founder of Equity Release Supermarket, comments:

“Equity release is available for homeowners over the age of 55 who wish to free up some of the money, tax-free, that has been built up in the equity of their home. The interest rate is fixed for life and the plan is repaid when the homeowner dies or moves into long-term care.

“It is perhaps unsurprising that repaying a mortgage is the top reason for equity release. As interest rates and living costs continue to rise, borrowers will be looking for ways to reduce their monthly payments. By using an equity release scheme, such as a lifetime mortgage, to pay off your existing interest-only mortgage you will no longer need to make monthly payments unless desired. This can help make monthly savings and alleviate financial pressures, especially for those who have seen their mortgage payments rise in recent months due to interest rates.

“It is interesting to see that gifting money through equity release has risen over the last six months. Money gifted through equity release becomes exempt from inheritance tax, provided that the gift giver lives for seven years afterwards. Inheritance tax can significantly reduce the amount of wealth that you may be able to pass on, so we often find that many people turn to equity release as a strategy for reducing the impact it will have on an estate.

“In this uncertain economic climate, it is more important than ever that borrowers are getting advice on what product options are available across the whole equity release market. For anyone considering equity release, we would suggest discussing your plans with one of our equity release advisers.”