Stonehaven’s research shows that over one in three (38%) of their customers has applied for a lifetime mortgage for this reason in the last three months. Thousands of older borrowers could face losing their homes because they have not made adequate provision to repay their mortgage debt when their interest-only loan matures.
Other popular reasons for using equity release included making home and garden improvements with 30% of customers using the loan to improve their current home. Consolidating unsecured debt was the reason for 28% of borrowers to help simplify their finances and 19% of customers were using the product to gift to relatives as children and grandchildren struggle to save deposits for their first homes and increasing university fees.
The research also showed that 20% of customers are using the mortgage to buy a new property as homeowners choose to ‘upsize’ to a new home or move closer to town centre’s to be near local amenities. Many mainstream lenders restrict their lending criteria for those in, or approaching, retirement which has led to the uptake in those using lifetime mortgages for this reason.
Alice Watson, product and communications manager, Stonehaven, said:
“The lifetime mortgage market has evolved considerably, reflecting the changing needs and aspirations of retirees. An increasing number of our customers are applying for lifetime mortgages to clear their existing mortgage as it offers a sensible solution to the interest-only time bomb for those who do not have a repayment vehicle in place.
“Thanks to increased property prices, older homeowners with substantial equity in their home can look to lifetime mortgages to unlock some of the capital. With rumours of interest rate hikes on the horizon, older homeowners who are approaching retirement are looking for a financial product which offers them life-long stability with no surprises further down the line.
“The Chancellor’s pension changes brought in during the 2014 Budget means equity release now has a much bigger role to play and for many retirees it will be the sensible solution to avoid financial hardship. Flexible products mean the borrowing and payment options can be changed to suit individual needs – offering lump sums for home improvements or using it to top up retirement income.”
