The UK has undergone a shift in attitude towards equity release, according to the Mortgage Advice Bureau.

While home improvements were once considered synonymous with releasing equity, data from Mortgage Advice Bureau Later Life’s 2021 Market Monitor revealed that proportion of customers using housing equity for this purpose has almost halved, decreasing from 61% in 2020 to 34% in 2021.

The report indicated that customers continue to use equity release to meet their financial needs as opposed to discretionary spending. For instance, over a third (38%) of people used equity release to repay their mortgage borrowing, while 27% used it to clear any unsecured debts.

Moreover, the proportion of equity release used to repay unsecured debts fell by two thirds from 18% (2020) down to 6% (2021). While people continue to use equity release for this purpose (as indicated in the statistics above), this decrease indicates that many may have cleared much of their outstanding borrowing before taking out a plan, or are confident that repaying their mortgage will increase their income sufficiently in order to meet these costs.

Gifting, meanwhile, remained fairly robust, with 22% of customers choosing to use all or some of their equity in this manner.
Mortgage Advice Bureau believes the equity release market changed significantly over the two years of the pandemic, and while it’s anticipated that pent-up discretionary spending is likely to feature in the statistics for the 2022 financial year, the company said the idea that equity release can be used to make people more financially robust now appears to be heavily embedded into the nation’s mindset.

Steve Humphries, proposition director, Mortgage Advice Bureau Later Life, commented: “Equity release offers individuals a way to benefit from stored equity without having to downsize their property, and it is clear from the Market Monitor that attitudes around how it is used are changing.

“With interest-only mortgages a popular option with those in the over-55 age bracket, and many of these terms coming to an end, many will be turning to equity release as a means to repay their outstanding interest-only mortgages instead.

“It’s an indisputable fact that equity release can provide a financial lifeline for those without a plan for what happens when their interest-only mortgage ends. In fact, according to the 2021 Market Monitor, 38% of customers used some of their released funds to pay off their existing mortgage in 2021.”