Cost of living crisis sees pensioners relying on equity release soar

The cost of living crisis has seen a striking 23% year-on-year increase in pensioners across Britain relying on equity release to fund their retirement, new research has shown.

At a time when the UK’s pensioners are beginning to outnumber children and a record cost of living crisis is permeating households, slashed finances mean retiring comfortably has been put on hold for millions across the UK.

For many, this has intensified severely as 22% of pensioners are already reducing or stopping spending on medications with 15% skipping meals or expected to do so over the same period, according to a survey conducted by Age UK.

This has led to a 23% year-on-year increase in people turning to equity release – a financial service allowing homeowners to access capital tied up in their home without selling it – as a “vital lifeline” amidst the cost of living crisis.

Coined “The great unretirement”, the Office for National Statistics (ONS) has released reports of nearly 100,000 retirees returning to work in the last year as a result of surging bills. In tandem with this, according to the Equity Release Council, over 93,000 people have taken out this type of plan/loan in 2022.

With the purpose of creating financial liquidity, stability and bettering quality of life, Senior Capital was created to serve a growing number of homeowners looking to access capital from the £800 billion currently tied up in property wealth.

With a vast majority of millennials unable to access the housing ladder – and a 40% standard Inheritance Tax rate – Britain’s wealth is currently held within the remits of those who are now desperate to release this capital – with 1-in-5 of those aged 65+ classified as millionaires, according to asset manager Netwealth.

With the typical homeowner now having five years’ worth of retirement income tied up in their property, there is a dire need for new lending structures that can transform this into cash to help both pensioners in need and the economy.

Managing Partner of Senior Capital, Rudy Khaitan, commented on releasing equity and the importance of LTV:

“There is a growing need for new products that offer greater flexibility and choice, particularly in the relatively underserved later life lending market. For pensioners or anyone planning for their retirement, LTV is a critical component when assessing your quality of life during your later years, so it’s vital to investigate a multitude of options that can help ease your financial obligations, as remortgaging may not always be the right option.

The right equity release mortgage product, particularly those that offer the greatest flexibility through limited prepayment penalties, can be the better option vs a more traditional mortgage when you want to unlock the value in your home without taking on additional monthly repayments.”

“It allows homeowners to access the equity built up in their property, providing a tax-free lump sum to supplement regular income, whilst still retaining ownership and the right to live in their home for life or until they move into long-term care. This can be particularly advantageous for those who are retired or have limited income, as it offers financial flexibility and stability without the burden of servicing higher mortgage repayments.”