What is the new main driver for equity release?

Repaying a mortgage used to be the main reason people released equity from their home — but not so this year, according to new statistics from Responsible Life.

In 2022, more borrowers have taken out a lifetime mortgage to fund home improvements than repay mortgages for the first time.

In the year to the end of September, home renovation has been the main reason customers have unlocked housing wealth in five of these nine months.

Throughout 2020 and 2021, there wasn’t a single month when home improvement topped the list as the main reason customers were accessing the loans.

Responsible Life believes the change in trend is a temporary one driven by the pandemic property boom, which has unlocked greater options in retirement for those homeowners who are mortgage-free. The average UK property price has risen 15.5% in the year to July 2022 and the average home has risen in value by £60,178 since the start of 2020.

Responsible Life records the primary reason each customer takes out a lifetime mortgage. Repayment of existing mortgages has nearly always been the biggest reason month-to-month with few exceptions. In fact, according to the company’s data, you’d have to go all the way back to July 2019 to find a month when mortgage repayment fell out of the top spot.

Supplementing income, early inheritance and house deposits remain other popular reasons why people take out equity release loans.

Steve Wilkie, executive chairman of Responsible Life, said: “This is the first time we’ve seen a change like this in the equity release market. You used to be able to guarantee that mortgage repayment would be the most popular reason customers would take out a lifetime mortgage mortgage.

“This year we’ve seen that assumption turned on its head and it’s likely to be a symptom of how, for homeowners, the proportion of their wealth tied up in their main home has ballooned over the past two years. We expect mortgage repayment to regain its crown in the medium term, but it’s significant that what was once considered a product of last resort is now clearly anything but.”