Equity Release Lenders Struggle To Match Calls For Cash

Financial firms are rushing to offer equity release loans to the over 65s as they rush to unlock cash for retirement.

Rather than downsize, the over 65s prefer to stay in their homes and many spend the extra cash on care funding and helping with the bills.

More than 1.3 million requests go out to councils for help with care each year, but only 175,000 are fully funded, according to equity release firm Key Advice.

And with care home costs starting from around £30,000 a year, the only place many over 65s can look for financial help is more than £1 trillion of equity sealed in the value of their homes.

This burgeoning market is now becoming flooding with firms seeking to meet demand.

Deals increase by 300%

In only five months, the number of deals available has leapt from 144 to 221 – a 53% increase since the start of 2019 and a massive 300% rise from 73 at the end of 2016.

Plans are becoming more sophisticated, says provider Key Partnerships, including downsizing protection; allowing interest payments; allowing ad-hoc repayments; offering fixed repayment charges; protected inheritance options; offering drawdown and lending on sheltered or age restricted accommodation.

Data shows 48% of plans offer downsizing protection, while 20% allow customers to pay interest on loans and 27% of the current product range offer drawdown facilities.

Around 35% of plans lend on sheltered or age-restricted properties, 57% allow one-off repayments.

Advisers also have a decision to make on early repayment charges – around 39% of plans have fixed charges while the rest are variable.

Demand transforms market

Jason Ruse, head of Key Partnerships said: “Customer demand is transforming the equity release market and lenders have launched a range of new products with innovative features to meet customer needs. This is highlighted by the fact that the number of equity release plans has increased threefold in as many years.

“Although, some of the new plans have incorporated small but significant tweaks to an existing plan, it does mean there are now 221 variations available on the market. It also means that there are major innovations and new options for customers and their advisers to be aware of.

“Some customers may be interested in releasing the maximum amount from their property while others will be interested in the range of innovative options but all will want to release wealth in the most efficient way for their individual circumstances.”

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