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Equity release and the cost of living crisis

ended 29. November 2022

Equity release is often used as a way to gift deposits to children to help them buy their homes, but Newspage asked brokers if they are seeing more examples of people releasing equity to bolster their own finances due to the soaring cost of living and rising mortgage payments. Their views are below.

9 responses from the Newspage community

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Stuart Powell
Managing Director at Advice Guru
The huge growth in the equity release market in 2022 has been partly due to clients releasing funds to cope with increased monthly costs caused by the cost of living crisis. Our clients often have many reasons to raise funds using their property wealth rather than just the one. It is logical when over-55s are considering Lifetime Mortgages to consider if their savings and income will cover future costs. 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. Against this grim backdrop, why would you not consider equity release as a viable option?
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Justin Moy
Managing Director at EHF Mortgages
Equity release was originally designed to be a means of releasing value in your home to help pay for life costs, so to borrow to help with funding a normal lifestyle is not a new concept. We have been sidetracked by their use to help the children move home to an extent. I think we need to explore at what age homeowners are turning to equity release. Products typically start from age 55, so if we are seeing those just turning that age, and looking to raise funds for lifestyle or living costs, then I think we need to be cautious and also look at the opportunity to service that borrowing. A number of products allows for monthly interest servicing, so the debt doesn’t increase over time. But with lifetime mortgage rates over double their cost from the start of the year, this could be an expensive option if interest is also rolled up onto the loan. Careful consideration of other options is essential, including availability of any grants and government help, as well as a review of other pensions and investments, or downsizing of the home too.
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Samuel Mather-Holgate
Independent Financial Adviser at Mather and Murray Financial
A lot of our clients use equity release as a way of helping their children, normally to get onto the housing ladder. However, 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.
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Samuel Gee
Director at Manning Gee Investments Limited
In exactly the right circumstances, lifetime mortgages, often known as equity release, can be positively life-changing. People have never asked us for help with frivolous spending, but for the considered use of capital to support their needs, rarely wants. 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. 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. And what child would want their parents living in a cold home for the sake of a better inheritance? We always get the family involved, and have seen lives changed through decent advice. It’s never for that holiday of a lifetime.
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Dan Osman
Head of Later Life Lending (Age 55+) at UK Moneyman
We have definitely seen a shift from aspirational objectives towards more introspective, needs-based borrowing, but this is not always to shore up a person's own finances. Many older borrowers also have savings which are showing better returns and often their focus is releasing funds to support family members either struggling with the cost of living or to provide larger deposits for those first-time buyers stuck between rising rents and elevated mortgage rates.
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Natalie Hines
Founder at Premier One Mortgages
Over the years, equity release has had some negative press. The equity release market has come a long way since. I have definitely seen more enquiries recently for clients looking to release equity. Every equity release case is unique but I’m starting to deal with more and more people saying their family want them to live comfortably now and use the equity in the family home. I think we will see a lot more people using equity release in the future.
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Paul Neal
Mortgages & Equity Release Advisor at First Choice Financial Services
People using equity release to shore up their own finances is definitely becoming more common now. Parents are taking equity release to bolster their own income, not just pay for their kids' deposits, as pensions aren't cutting it given the increases in the cost of living and soaring energy prices. Equity release is a double-edged sword and needs careful consideration, as it will erode the equity in your property and eat away at any inheritance left for your children. Equity release should only be considered if there are no other options, and discussed with an accredited advisor so you are fully aware of the risks involved.
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Rhys Schofield
Brand Director at Peak Mortgages and Protection
You can't take it with you, and if you can't keep the house warm you may well be moving on sooner. On a serious note, there is a question as to why an elderly person who owns their house outright is sitting shivering through winter whilst sat on a few hundred thousand pounds in equity? These are the generations who've done the best out of decades of rising house prices so cashing in their chips may seem appealing. Yes you will be reducing the amount of inheritance you leave behind, and you should always get proper advice to make sure it's suitable, but I'm sure most families would want their elderly relatives to live a happy and comfortable retirement.
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Scott Taylor-Barr
Principal Adviser at Barnsdale Financial Management
Whilst equity release is not my area of expertise, I do refer a number of clients each year for this specialist advice. The past few clients I have spoken to about a lifetime mortgage have, thankfully, not been using it to fund their day-to-day living expenses, but have been raising the money to repay interest-only mortgages on their homes that have become due for repayment to the lender.