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The Financial Options Group

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Equity release schemes: How tapping into your property’s value could benefit you in retirement

Equity release can offer a significant boost to your income. If your pension isn’t providing you with enough to achieve your lifestyle aspirations, this support may prove invaluable…

OVER the past few years, equity release lending has surged in popularity, as homeowners seek effective ways to cash in on the value of their homes.

Citing problems with “interest only” mortgages as a contributing factor, they are turning to equity release schemes more than ever before.

Equity release schemes allow homeowners to take lump sums or regular withdrawals from their properties – an attractive prospect for retired individuals eager to invest or to help younger family members onto the housing ladder.

In 2018, homeowners over the age of 55 releasing a staggering £11m per day according to the Equity Release Council – the trade body which regulates equity release in the UK. In 2019, some £1.85bn in housing wealth was unlocked in the first half of the year by homeowners taking equity release – a record high.

Once upon a time, equity release was considered something of a last resort for homeowners seeking to raise cash quickly. However, a number of recent developments have helped ease concern among financial advisers, cementing its place within the mainstream of financial planning.

So, what’s changed?

In 2017, the Equity Release Council reported that a record-breaking £3.06bn had been extracted from UK properties. This represented a meteoric £909m rise from the previous year; helping to normalise equity release in the eyes of many sceptical financial analysts.

A steady decline in equity release interest rates to the historically low figure of 4.9 per cent has also helped the process along. What’s more, equity release providers have recently begun furnishing their products with a growing list of features designed to assuage the fears of risk-averse homeowners.

Chief among them are regular or ad-hoc payments. These allow you to keep your loan size under control, as you would when overpaying on a conventional mortgage. Lenders will also allow you to convert to a “roll-up” option – meaning interest is added to the loan which is paid off on the sale of the property in the event you can no longer afford your repayments.

Roughly half of all equity release lenders allow a “drawdown” option, where money is released in small increments rather than in one lump sum. This option is likely to appeal to older homeowners who won’t be forced to take money out of their pensions during periods of high financial instability when the stock market is particularly volatile. Similarly, around half of lenders now offer an “inheritance guarantee”, an option designed specifically to appeal to retirees.

The inheritance guarantee has proved popular with older homeowners as it allows them to designate a proportion of their housing wealth to pass onto the younger generation.

While the inheritance guarantee cuts the amount of cash you are able to release from your property, it also means the ring-fenced amount is set aside no matter what the total size of your loan turns out to be.

Hoping to help your children or grandchildren buy a house or cope with mounting school fees or living expenses? Then the inheritance guarantee could be a salient option.

Together, these recent developments represent greater flexibility for homeowners, allowing them access to their wealth while still retaining their most valuable asset.

Sarah Kendell, operations director at the Financial Options Group, said: “The power to choose one’s own financial direction is proving to be extremely popular. We have seen a surge of equity release activity over the past 18 months, and due to the availability of flexible loan and repayment features which allow individuals to extract wealth according to their wishes, we anticipate that this trend will continue. I would strongly encourage anyone considering the release of equity from their property to speak with a financial advice professional. An experienced adviser can bring much-needed clarity to homeowners as they explore their equity release options, meaning they can be assured that the management of their assets and wealth will create the most benefit.”

Keep up with the latest news and trends from the real estate and financial advice sectors by following our social channels on Facebook, Twitter and LinkedIn. If you’re interested in finding out more about equity release schemes, arrange a no-obligation consultation with one of our experienced financial advisers by calling 0161 764 9944, or by emailing



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