Equity release cases have “rapidly increased” over the past year as homeowners aged over 55 look for solutions to combat rising residential mortgage rates, 55Plus has reported.
Following warnings from the Bank of England that mortgage repayments will continue to increase, 55Plus has witnessed an increase in enquiries from people looking to remortgage.
The company attributed this rise to increased interest rates.
This was evidenced by new figures, obtained by 55Plus, from Canada Life which revealed that nearly half (44 per cent) of all equity release applications were to remortgage from January to March 2023.
55Plus explained that equity release gives flexible repayment options, whereby savers have the choice to either pay nothing at all towards the debt or overpay the interest if or when they prefer.
The company added that this has made it popular with people over 55 looking to release the value from their homes to support necessary costs without selling.
This provides the "assurance" that they can remain in their house until they pass away, move into long term care or the property is eventually sold, it added.
55Plus founder and director, Jan Johnson, stated that, after more than a decade of residential rates at 0.75 per cent or below, this has left many homeowners whose fixed deals are ending, and those on tracker mortgages, facing "huge blows" to their finances.
He added that this could even lead to them losing their homes as a result.
Canada Life home finance proposition director, Steven Scales, added that, in today’s “unpredictable economic environment”, equity release can offer “peace of mind” and certainty for homeowners aged 55 and over, especially given the rise in house prices in the last few years.
“Whether you are being confronted by the possibility of repossession, or simply want to free up some cash from your home, it is worth speaking to an independent financial adviser to understand your options,” he explained.
Plus55 included the case study of Philip Jenner, a retired 70-year-old who, due to the rates increases, was facing repossession of his three-bed family home.
Jenner had taken out a mortgage with Barclays in 2010 and was struggling to make the repayments since January 2023, with an outstanding balance of £60,000.
At an interest rate of 6.77 per cent, his repayments were due to jump from £533 to £1,666 a month.
After getting in touch with Plus55, Jenner was able to release a total of £65,000, paying off the remaining interest with Barclays, allowing Mr Jenner to be free of mortgage payments and remain in the family home.
tom.dunstan@ft.com
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