The impact of the pandemic means over-50s are now more likely to stay in their current home for life, having formed a greater attachment to living in the same space as fond memories.

New research predicts that as a result we could be set to see an increase in people opting to take out equity release products to fund home improvements, with 17% saying they would rather spend money to make their house more accessible than relocate.

An equity release loan is designed for the over 55s, and works differently to standard mortgages. On some Equity Release products you do not have to make monthly payments. Instead, the interest rolls up and is repaid (together with the original loan) on the sale of the house, either when you move into care or upon death.

With families wanting home comforts more than ever and soaring property prices, homeowners have been taking advantage of having even greater equity at their disposal.

The latest house price figures show that the UK house prices grew at the fastest pace in 15 years over the past three months, with the average home valued at £20,000 more than this time last year.

Prices rose by 3.4% in the quarter to the end of November, which is the highest quarterly rate since late 2006 and brought the average price of a home to a record of £272,992.

During the first half of 2021 homeowners unlocked £2.3 billion of property wealth to support their finances using equity release loans.

Yet releasing cash from a property was a growing trend even before the pandemic with more and more people taking advantage of the money locked up in their homes.

It’s not just home improvements that trigger the need to raise cash. Homeowners take out equity release to boost their income in retirement where pensions haven’t quite met the living standards they wanted. It’s also commonly used to clear debt or to help out family.

Getting The Right Deal

Equity release loans are becoming more competitive and more flexible.

For example, more than two thirds (68%) of equity release loans allow customers to make voluntary capital repayments with no early repayment charge. This reduces the final interest payment due when the property is sold, leaving more money for long-term care or to leave as inheritance.

Increasingly savvy customers are focused on competitive interest rates, fixed early repayment charges and penalty-free repayments.

The growth in the market is not just about new equity release loans, however. It’s expected that equity release business will be driven by growing numbers of people interested in switching existing deals to take advantage of the increased flexibility there has been in products over the last few years. This includes the ability to make monthly repayments to cut overall interest charges.