What remains the most popular use of equity release funds?

Home improvements remain the most popular reason for releasing additional funds from a lifetime mortgage (54%), as homeowners draw on property wealth to make long-term improvements and enhance their home’s energy efficiency, new data from L&G Home Finance shows.

Examples of energy-efficient improvements include installing double glazed windows, installing insulation or replacing boilers. With the Government recently announcing the allocation of nearly £2 billion to retrofit homes towards net zero, it’s likely homeowners will face further nudges in coming years to make their homes more sustainable.

In the first three months of 2023, Legal & General’s existing customers continued to drawdown funds to supplement and support everyday living expenses (25%), amidst a backdrop of high inflation and challenging living costs. Recent ONS statistics showed that the average UK house price increased 6.3% in the 12 months to January 2023, at £310,000 on average in England. With new Legal & General Home Finance customers releasing 24% from their homes on average, this could see customers in England accessing more than £74,000 from a lifetime mortgage.

With younger generations facing the squeeze from financial pressures, data shows that gifting remains a consistent use of equity release (9%). With over-55s looking to support family and loved ones at a time when they need it most, reasons for providing financial support could include getting onto the property ladder or contributing to big one-off expenses, like weddings. New applications from potential Legal & General customers indicate that people are increasingly looking to take out a lifetime mortgage for gifting purposes (13%), a trend expected to continue in the near future.

New application data also indicated that after home improvements, paying off an existing mortgage is one of the most popular uses of funds (23%), as people use the equity in their home to set up for retirement. Recent Equity Release Council data shows that total mortgage debt hit a high of £1.6 trillion in December last year, combined with higher average property wealth, homeowners will be keen to make repayments and become mortgage-free in retirement.

Craig Brown, CEO at Legal & General Home Finance, said: “For those nearing or at retirement, accessing wealth tied up in the home can play a significant part of later-life planning and for many people, property is their most substantial asset, even with recent challenges in the market.

“Our data shows lifetime mortgages are playing an important role in long term financial planning and that making a home comfortable and sustainable in the long term continues to be a popular use for funds. We also know that many people see releasing equity from their property as a way to provide a ‘living inheritance,’ with the opportunity to see loved ones benefit from the money when they need it most."