A recent study has revealed that the North-West of England is the third-highest location in the UK for releasing equity. The data comes at a crucial time in UK economics, with concurrent crises having existential impacts on domestic budgets and household affordability.
The UK Economy
The cost-of-living crisis, precipitated by steep rises in the cost of household energy, is set to worsen as the Ofgem price cap signals further rises. Meanwhile, the cost of groceries and other domestic goods shows no sign of abating.
These rises are impacting almost every demographic in the UK, but those above the age of 55 are perhaps the most at risk when it comes to maintaining quality of life. Retirees with modest pensions are facing a difficult balancing act when it comes to their finances – perhaps forming one of the foundational arguments for an overall increase in equity release usage.
What is an Equity Release?
At this point, there may still be some who are not confident on what an equity release mortgage is. In essence, equity release refers to the practice of ‘releasing’ part of the value of an asset in the form of an up-front loan or annuity. An equity release mortgage is simply a specific form of equity release agreement, wherein the value of a home is unlocked while retaining ownership of said home.
Equity release mortgages are only available to those aged 55 or over; it is commonly used as a method of subsidy for retirement, with funds used to maintain a quality of life without selling or downsizing one’s home. The loan is repaid in full when the home is eventually sold, either by the homeowner or the homeowner’s estate.
Equity Release in the North West
The study, undertaken by equity release providers Key Advice, found that the North West of England had the third-largest number of equity release plans in the country. The region was responsible for 2,534 plans; the second-most plans taken out were in the South West, where just over 3000 plans had been exercised. The top spot went to the South East, where 6006 plans were taken out.
Equity release mortgages do not typically release the entire value of a given property, and customers can choose the amount they would like to claim. For the north west, the average value of equity release mortgages was £69,659 – some £30,000 below the national average.
Equity Release Usage
The study by Key Advice also uncovered the national statistics for spending intentions and demographics amongst equity release plan holders. According to the data, 40% of equity releases were taken out in order to fund mortgage repayments, with a further 9% used to consolidate unsecured debts. However, 7% of equity releases were taken out in order to fund home improvements, and 12% to fund gifts for other family members.
