Rise in equity release use to ease cost of living pressures

A growing number of older borrowers are using equity release, a type of lifetime mortgage, to supplement their incomes amid the cost of living crisis.

Having been used more and more during the pandemic to help children onto the housing ladder, older borrowers are now drawing equity out of their properties simply to live more comfortably.

FTAdviser spoke to one broker last month, director at 55 Plus Equity Release Jan Johnson, whose client drew £6,000 out in equity because she was terrified of turning the heating on. 

Other clients of hers have used lifetime mortgage products to service their debts in an effort to fend off repossession after falling short on repayments.

What child would want their parents living in a cold home for the sake of a better inheritance?Samuel Gee, Manning Gee Investments

Now, more brokers have come forward to note the trend of clients using equity release to shore up their finances as the cost of living crisis bites.

“A lot of our clients use equity release as a way of helping their children, normally to get onto the housing ladder,” said Samuel Mather-Holgate, a broker at Swindon-based advisory firm Mather & Murray Financial.

“Although this is still the case we have certainly seen more and more clients come to us for advice as to whether it's suitable to supplement their own incomes. 

“Thankfully, there are some creative products and guarantees that mean it can be used for this, although there is definitely space in the market for more innovation.”

Over the past month, a significant number of equity release products were taken off the market, according to Moneyfacts. 

Some products have now returned, but many still have not.

Advisers have highlighted how this has led to “less choice” and a lack of whole-of-market advice.

Some lifetime mortgage lenders have cut their interest rates to sub-6 per cent levels, after brokers said their clients simply could not stomach 8 per cent rates leading to a ‘wait and see’ attitude which inevitably stalled lender sales.

A huge number of over-55s will not have enough money to cover basic bills in the coming months and the choice of 'heat or eat' will be a reality for many.Stuart Powell, Ocean Mortgages

Samuel Gee, a Bristol-based director at Manning Gee Investments, said the cost of living crisis has definitely boosted interest, from clients needing to update their 1960s inefficient heating systems, to wanting to help struggling children with an advance of inheritance. 

He added: “Where a client has a large asset but lives on state pension and pension credit, some modest capital can transform their life without hugely affecting their beneficiaries.