Equity release schemes allow homeowners to take money out of their property without having to sell their home and move out. These schemes are mainly targeted at older homeowners who might otherwise have trouble getting a new mortgage due to their age or because they have a limited monthly income. The older you are the more you will be offered, but the maximum loan is typically around 50% of the value of the home.
With more and more older people looking to invest in buy-to-let property in order to secure their income, it is not really a surprise that we are seeing an increase in equity release lending. Indeed, the Equity Release Council has revealed today that equity release lending increased by 44% year on year over Q3, and the total value of this type of lending exceed £800m in a quarter for the first time ever. A total of £824m of property wealth was withdrawn by over-55s in Q3 2017, up from the £701m withdrawn in Q2 2017 and much more than the £527m withdrawn in Q3 2016.
Furthermore, the amount lent via equity release in the first nine months of 2017 has already surpassed the £2bn lent over the whole of 2016, and lending activity has increased by 83% over the last two years.
Property is many peoples’ largest asset and it is no surprise that those nearing retirement are keen to utilise it to secure their financial futures as much as possible. The National Association of Estates Agents confirmed today that the number of sales agreed in September remained flat despite both supply and demand increasing over the month. Some of the UK’s lowest markets, for instance Sunderland and Bradford, are seeing approximately a quarter of homes being for sale for six months or longer. This sort of situation tends to have knock-on effects up and down chains, and it is preferable that the situation is avoided wherever possible.
This suggests that there is a shortage of people who have both the available cash and the means to move house and deal with all of the issues which can crop up. For this reason the growing number of older people who are releasing equity from their homes in order to purchase an investment property should be welcomed by the market as these are the people most likely to be able to buy in the short term and who don’t have a chain.
The hope is that the increasing amount of equity being released from homes is reinvested into the market, thereby benefitting everybody involved.
Are you an older, first time landlord looking for more information about property management and letting? Get in touch with Intus Lettings today for more information on how we can help you.
