Reasons for equity release use altered in pandemic

4 November 2021

Clearing existing mortgages remains the leading priority for equity release customers, new data from Canada Life has revealed, but new trends have emerged in the pandemic.

According to Canada Life’s customer data for the first nine months of the year, nearly half (46%) of equity release loans were used to pay off an existing mortgage. The second most popular reason for accessing property wealth was to make home improvements, accounting for around a third (34%) of loans.
Debt consolidation also remained popular, with one in five (19%) using equity release in this way.
However, Canada Life said the pandemic had also driven a rise in the number of people turning to equity release to purchase a new property, with 15% of loans used for this purpose during the first three quarters of this year, compared to 10% in 2020.
Alice Watson, head of marketing, insurance at Canada Life, said: “The reason for advances on property using equity release shows a changing pattern of use but the main driver continues to be clearing an existing mortgage, likely due to the volume of maturing interest-only mortgages.
“But looking beneath the surface reveals a diverse mix of demand, which include new property purchases, no doubt buoyed by the recent stamp duty holiday. Lifestyle purchases remain less attractive, with fewer customers using equity to fund new car purchases while we have yet to witness a bounce back in the number of advances to fund holidays.”
Watson said the pandemic had “shone a spotlight” on the nation’s finances and the equity release market had come to the fore.
She added: “As we emerge into the new normal the equity release market will continue to provide an overview of the nation’s financial priorities and with the help of a financial adviser, their clients can plan and secure their financial futures.”

Professional Paraplanner