31% rise in the size of equity release mortgages
The amount of equity that lifetime mortgage customers are releasing has leapt more than 30% in a year, said Responsible Life.
The later life mortgage broker said low rates have driven a “middle class stampede” towards the sector, boosting the average amount released by its customers to £112,700, from £86,000 a year ago.
The company the rise is down to the growing popularity of lifetime mortgages among wealthier homeowners who have “cottoned on” to the historically low interest rates and the boost in living standards that equity release can provide.
Rates on lifetime mortgages have more than halved in recent years to below 3% in many cases.
This shift to a wealthier audience is borne out by a simultaneous increase in the average value of the properties that are being presented for underwriting.
The average value of homes being used to secure lifetime mortgages is 19.4% higher than a year ago, at £487,000 — which is nearly double the average UK house price of £256,405.
These wealthier customers are using equity release to gift money to children and loved ones, renovate their homes, pay off existing interest-only mortgages and fund their retirement.
Steve Wilkie, executive chairman of Responsible Life, said: “There’s no doubt there has been a middle-class stampede for lifetime mortgages over the past year thanks to interest rates sinking to historic lows.
“Gone are the days when they were considered a product of last resort. That couldn’t be further from the truth now.”