Customers continued the trend of aspirational spending on treats like holidays (25% vs 11% in 2021), perhaps prompted by the surges in travel that have seen UK airports struggling this summer.
However, with inflation the highest it’s been in decades and living costs rising, many homeowners are turning to their property to help bolster their bank balances, with 25% (vs. 19% in 2021) supplementing their income with the value found in their home.
The data also shows that some customers are using their property wealth to fund gifts to loved ones (12%). However, this could increase further as financial pressures prompt older generations to provide more support to younger relatives.
Legal & General’s recent Equity Economy report, conducted with the Centre for Economics and Business Research, found that people are increasingly making the most of property wealth.
According to the report’s findings equity release funds one in every £90 spent by retired people within the UK currently. It also forecasts that the equity release market will surpass £12 billion in 2030, with customers continuing to fund day-to-day spending, such as food, clothes, transport and entertainment, occasional big purchases, such as home improvements, international holidays, and financial planning.
Craig Brown, CEO of Legal & General Home Finance, said: “We are increasingly seeing people turn to their properties to achieve life-long goals, or to improve the standard of their retirement. This is especially true following the pandemic property boom, which has seen people’s homes become one of their most powerful assets.
“Even as the cost-of-living crisis intensifies, homeowners are using property wealth to fund aspirational spending, amid pent-up demand for holidays. But we’re also seeing priorities shifting in response to the cost-of-living crisis. Many homeowners are looking to their property wealth to help bolster their squeezed incomes and build a safety net for both them and their loved ones.
“Financial advice is a requirement for equity release customers; this, along with stringent safeguards and new industry standards, has seen it evolve into a solution that should be considered along with other sources of retirement income. Advisers will play an increasingly important role in helping homeowners understand if equity release might be a solution to ease the current pressures placed on their finances, or to help support family members. Where equity release is an appropriate solution, then products such as our optional payment lifetime mortgage, which allows customers to pay some, or all, of their monthly interest are proving popular.”
