Equity release and the cost of living crisis in 2023

Equity release and the cost of living crisis in 2023 main image

*Updated January 2023*

With inflation remaining at a 40 year high the cost of living crisis continues to be real concern for millions of UK households. With sky high energy bills set to increase further throughout 2023, turbulent fuel prices and price hikes across many products and services, families throughout the country are looking for ways to save money and boost their income.

Equity release is one way over 55s can ease the pressure of the financial crisis. With over £740 billion of equity in their properties, it’s not surprising that a growing number of older homeowners are turning to their property as a financial lifeline, especially as house prices continue to rise.

The property goldmine – the savings you didn’t know you had

According to the latest UK house price index, British property wealth exceeded a record £7 trillion by September 2022, with house prices rising throughout the year by 9.5%. And although more recently property prices have started to fall, with the Nationwide House Price Index predicting a drop of around 8% throughout 2023, UK house prices are still significantly above pre-pandemic levels.

Equity release helps over 55s tap into that property wealth, letting you access the money saved in your home to use as you wish. Perhaps to increase your retirement income, pay off an existing mortgage, make home improvements or help family financially.

Speaking about equity release and the cost of living, Chair of the Equity Release Council David Burrows said: “After years of putting money away in bricks and mortar, older homeowners are turning the tables and taking funds from their homes in order to boost their retirement income, meet one off costs and gift a living inheritance to family.”

“The equity release market’s return to growth is part of a wider pick-up in later life lending activity, and the flexible design of modern lifetime mortgages gives customers more ways to manage their finances and access life-changing sums of money at a lower cost.”

How can equity release help with the cost of living crisis?

Equity release lets you access the equity tied up in your home. To be eligible you need to be 55 or over and own your own home. You may be eligible if you have an existing mortgage however this will need to be repaid with the money you release.

The amount you can release will depend on your age and the value of your property. According to the Equity Release Council, equity release lending reached a record £1.71bn in the third quarter of 2022, significantly up from £1.53bn achieved throughout the first three months of the year. While the size of new drawdown plans dipped 3% to £88,340, lump sum plans showed a 1% increase to around £133,770; equivalent to over 7 years retirement income.

With an equity release lifetime mortgage, there are no monthly repayments. Instead, both the loan and interest are repaid from the sale of your house once you die or move into long term care.

Equity release now offers greater choice and flexibility

There are now over 300 equity release products available and various options including downsizing protection and penalty-free partial repayments, giving customers the flexibility to reduce their loan size and borrowing costs should their circumstances change.

But with the recent rise in interest rates, can equity release still offer the best solution for older homeowners looking for extra cash? Speaking of the cost of living crisis, the Equity Release Council’s Chairman David Burrows said “While recent turbulence in financial markets has added to upward pressure on interest rates, product flexibilities and stringent safeguards mean modern equity release remains the most secure and adaptable way to access the money tied up in your home without giving up ownership or risking repossession through fixed repayment commitments.

“With the value of UK homes having passed £7 trillion, people are increasingly inclined to put their property wealth to work in later life to support themselves and family in the here-and-now.

Council standards mean there are measures in place to protect customers’ existing loans from rising interest rates, as well as ensuring that people can only take out equity release once they have considered it from every angle through detailed financial and legal advice.”

If you found this article interesting, you may also like ‘ Is equity release a good idea?’ and ‘The pros and cons of equity release’.

ashley shepherd expert author

This article was written by Ashley Shepherd, Managing Director and founder of Simply Equity Release, the specialist later life planningwebsite. With more than 30 years’ experience in financial services, Ashley is a recognised name in the equity release industry.

Learn more about Ashley.

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