Clue: it's no longer for borrowing repayments
Repaying a mortgage used to be the main reason people released equity from their home. This year, however, equity release has seen a surprise shift away from mortgage repayment as a primary motivator, according to new data from later life mortgage broker Responsible Life.
Since the beginning of the year to the end of September, more borrowers have taken out a lifetime mortgage to fund home improvements than repay mortgages ,for the first time. Home renovation was the main reason customers have unlocked housing wealth in five of these nine months, the broker revealed.
Responsible Life noted that the change was quite “a dramatic one” as 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.
Repayment of existing mortgages has nearly always been the biggest reason month to month with few exceptions. In fact, according to Responsible Life’s data, mortgage repayment last fell out of the top spot in July 2019.
Read more: Equity release new lending hits £1.5 billion.
The broker 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.
“This is the first time we’ve seen a change like this in the equity release market,” said Steve Wilkie, executive chairman at Responsible Life. “You used to be able to guarantee that mortgage repayment would be the most popular reason customers would take out a lifetime 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.”