Clearing existing mortgage still top reason for releasing equity

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Clearing an existing mortgage remains the top motivation for releasing equity (41%) for the sixth year running, according to new data from Canada Life.

Funding home improvements came second, with 28% of customers citing this as their main reason.

However, both categories decreased in popularity compared to 2022. The number of customers using equity release for existing mortgage repayments fell by eight percentage points (from 49% in 2022 to 41% in 2023), while funding home improvements dropped by three percentage points (from 32% in 2022 to 28% in 2023). The number of customers taking out equity to help with day-to-day costs also fell, from 20% in 2022 to 17% in 2023.

The analysis also shows a rise in the number of applicants looking to release equity to fund holidays. In 2022, 15% of applications were to pay for trips, but this increased to 20% in 2023 – now sitting at pre-pandemic 2019 levels when 21% were for holidays.

The top five reasons for releasing equity in 2023 were as follows:

2023

2022

2021

Clear existing mortgage – 41%

Clear existing mortgage – 49%

Clear existing mortgage – 46%

Home improvements – 28%

Home improvements – 32%

Home improvements – 34%

Holidays – 20%

Day to day living – 20%

Day to day living – 19%

Day to day living  – 17%

Consolidate unsecured debt – 16%

Consolidate unsecured debt – 18%

Consolidate unsecured debt – 16%

Holidays – 15%

Buy a new property – 15%

Sadna Zaman, proposition development manager, home finance at Canada Life, said: “Customers are continuing to use equity release for a wide variety of reasons, from home improvements to paying off existing mortgage borrowing. Day-to-day living remains within the top five reasons for releasing equity, with homeowners using the wealth they have built up in their properties to potentially offset increased outgoings thanks to the cost-of-living crisis.

“The variety of motivations for releasing equity highlights the flexibility and accessibility of the options available, allowing homeowners to enjoy their retirement in a way that best suits them and their families. However, equity release is a lifelong financial decision, so it’s vital that the long term costs are considered.”

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