Why the middle class are increasingly releasing equity
18 August 2021
More equity being released
The latest figures show that UK homeowners are choosing to release more equity than ever before, with the average amount of capital being unlocked standing at £103,710 – up 25% from the previous year. This rise in the average amount of equity being released in the UK is being dubbed as a ‘middle class stampede’, as there is a clear rise in wealthier homeowners choosing equity release to support their financial decisions.
It is often incorrectly assumed that only those who are strapped for cash may take the decision to release equity, but there are actually many more common reasons and motivations used, such as renovating, buying a new property or re-mortgaging.
Why are the middle class releasing equity?
The main factor that’s caused a rise in the amount of equity being released is that UK house prices have continuously risen year on year. This means that many older homeowners have become aware that the value of their property is now worth substantially more than the price they bought it for and, should they wish to, have the potential to unlock some of that capital to help achieve new lifestyle options.
Wealthier homeowners have been further motivated to explore equity release after reports of historically low interest rates throughout 2021 so far, as well as there being a record-breaking number of products now available to homeowners over 55. To break that down into simpler terms, lower interest rates require customers to pay back a smaller amount of money on top of what they borrow, whilst the rise in the amount of products available have allowed more people than ever to find an equity release plan that works for their individual circumstances. In short, for many, there has never been a better time to release equity.
Reasons for releasing equity
There are a number of reasons that middle class homeowners might choose to release equity from their properties. These include:
- To renovate: This past year we’ve all spent more time in our homes than ever, highlighting the areas that might need a little TLC and renovation
- Buying a new property: Whether it’s for upsizing, downsizing or holiday homes, releasing equity can help in new property purchases
- Re-mortgaging: There are many advantages to re-mortgaging in comparison to traditional mortgages. Find out more about whether re-mortgaging could help you, here
- Job loss: Coronavirus has changed many households’ financial situation and homeowners with more expensive properties will not be immune to this. Unfortunately, research shows that older workers have been at an increased risk of job loss, meaning some people are turning to equity release to help support them through a reduced income
- Plans protecting your family’s inheritance: Many equity release plans will help to protect a certain amount of value in the property, ensuring that your family are well looked after once you’re gone
- Helping friends and family onto the property ladder: Whilst many homeowners over-55 benefit from rising property prices, this has also made it harder for children or grandchildren to get onto the property ladder. Increasingly, over-55s are turning to equity release to help family realise their real estate dreams.
If you want to learn more about releasing equity, then please get in touch.
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