Homeowners cashing in on property boom

Property price rises have allowed more homeowners to release equity.
Property price rises have allowed more homeowners to release equity.

Growth in the housing market is seeing more Borderers opting to release money tied up in their properties to boost retirement income.

The three months to the end of September saw £19million released in Scotland, according to analysis from leading over-55s specialist adviser Key Retirement Solutions.

Of that, just over £422,000 came from eight properties in the Scottish Borders.

In the third quarter of 2013, customers took out equity release plans worth an average of £45,337 – 10% up on the same three months last year – fuelled by the property market surge, according to the group’s Equity Release Market Monitor.

The strong growth is being driven by increased awareness of equity release plans as a solution for retirement income planning issues.

The majority (70%) used some or all of the cash to help with regular bills or to establish an emergency fund.

Around 31% cleared off short and medium term debts like loans or credit cards.

However, crucially, 26% of customers needed the money to pay mortgage debts – underlining how equity release is growing as a solution for the interest-only crisis.

Customers are also using the funds released to improve lifestyles in retirement – 48% used some or all of the cash to pay for home or garden improvements; 31% paid for a holiday and 19% bought a new car.

Dean Mirfin, group director at Key Retirement Solutions says the equity release market was already growing strongly before the housing market revival.

“Across Scotland a total of £49,325,770 has been released so far this year, dwarfing last year’s figure of £30.6 million at the same stage,” he said.

“In addition, the corresponding number of equity release plans has rocketed from 801 in the first nine months of last year to 1171 in 2013.

“The property market growth is helping customers realise that housing wealth can play a major role in retirement planning both as a solution for problems such as interest-only and as a source of funds when other retirement income sources are under pressure.

“The market is on course for a record year with growth built on strong foundations due to its focus on advice and delivering solutions which suit changing lifestyles and reflect customer needs.”

In the UK as a whole, £808.19m in property wealth has been released so far this year – 15% up on the £702.8 million at the same stage of 2012 – putting the equity release market on course for a record year beating the £1 billion-plus released in 2009.