Equity Release and Lifetime Mortgage Customers Borrowing for ‘Aspirational Reasons’

Lifetime mortgage borrowers primarily released funds for aspirational (i.e. non-essential) purposes in the first half of this year indicating greater consumer confidence amid economic uncertainty, analysis from a lender has found.

Looking at the behaviour of its customer base, later life lender Pure Retirement found that releasing equity for non-essential purposes was the main motivation for people who had lump sums, drawdown plans (when borrowers don’t receive equity as a lump sum) and further advances (additional funds beyond drawdown facility).

Nearly a quarter (24%) of new borrowers released equity for home improvements, the most popular reason. This was up from 22% on last year. Repaying the mortgage or debt was the second most popular use of equity release, despite a drop from 22% to 21% annually.

Releasing funds for a holiday rose from the fifth most popular use last year, to the third in 2023. Pure Retirement said this was a sign of improved customer confidence.

Further pointing to the use of equity release for lifestyle purposes, car purchases were also the top five main reasons for a lifetime mortgage.

Drawdown and further advance customers

Among drawdown borrowers, home improvements were also the most popular reason for releasing equity. Two-fifths of borrowers used their loan for this purpose, however it was down from a share of 46% of borrowers last year.

Holidays were the second most popular use of released equity, although the share of borrowers using it for this reason fell by 2% annually.

Releasing funds to cover living expenses was the third most popular reason while buying a car fell from the third place to the fourth.

For further advance borrowers, home improvements were again the most popular reason for releasing equity.

Holidays rose from the fourth most popular use to the second, while creating an emergency fund and paying off debts respectively remained the third and fifth most popular uses.

Still gifting

Lifetime mortgage borrowers are still using their released funds for gifting purposes, Pure Retirement found.

This was the fourth most common reason for new borrowers, the fifth for drawdown customers and the fourth for those taking out further advances.

Scott Burman, head of distribution at Pure Retirement, said: “These latest figures point both to the changeable nature of the market, and to the diverse customer base the later life lending sector currently serves. While staples such as home improvements and debt repayments have remained popular, the rising consumer interest in things such as holidays demonstrates the wide array of lifetime mortgage uses and increasing customer confidence to use released funds for these means.

“On the flipside, we’re also seeing a rise in people using their drawdown facility for day-to-day living expenses, highlighting the need for continued product innovation to ensure ongoing later life lending solutions that are able to meet a variety of circumstances and needs.”

If you would like to explore your options in relation to releasing equity from your home to fund your expenses, why not contact us today for a free no-obligation consultation in the comfort of your own home.

Shared from Your Money