_Wealthy home owners are turning to Equity Release

The Later Life Finance service at Knight Frank was launched at the beginning of July this year. We introduced this new service because:

• Over 55s hold the majority of all property wealth in the UK (c.75%)
• Knight Frank’s research shows that the number of people aged over 65 living in the UK is forecast to increase by 20% to 12 million by 2027
• Advancements in healthcare mean individuals are living longer lives and managing health conditions better
• This group of ageing property owners want to unlock the wealth tied up in their homes for a number of reasons, including improving their homes, enhancing their income, helping their families and redistributing their wealth to the younger generations
• The Equity Release market has been growing steadily over recent years, and lower costs, more choice and increasing flexibility means Equity Release is becoming an increasingly popular way for older homeowners to access their wealth

The Equity Release Council have just reported an 8% rise in the Equity Release market in Q3 compared with Q2, with older homeowners releasing just under £1billion of funds from their properties in the three months from July to September. Average loan sizes during that period were £63,222 for draw-down plans, and £95,557 for lump sum plans.

Our Later Life Finance service launched at the beginning of Q3, and we have received a surprisingly high number of enquiries from older, wealthier home owners during that period. Equity Release is not the right answer for all of them, but where it is we have recommended Lifetime Mortgages with an average loan size of over £400,000. That’s more than 4 times larger than the average reported by the Council. We believe this is just the tip of the iceberg in terms of the steadily increasing demand from High Net Worth home owners.

The reasons our clients are using Equity Release appear to be in line with the wider market, i.e. enhancing their income, home improvements, repaying debts, but a noticeable amount are also raising funds to gift to their children (the Council call this providing a ‘living inheritance’ to family). Indeed, our clients are genuinely concerned about redistributing their wealth to the younger generations, and most can afford to do so.

There are of course a large number of variables involved, including making sure they don’t give away too much and end up leaving themselves short when the time comes to pay for things like care. At Knight Frank Finance we discuss these future variables carefully with our clients. We will also work closely with our clients’ trusted tax and wealth advisers to find a solution that is appropriate both now and in the future. 

We are still new to this market, but these early signs suggest High Net Worth home owners are starting to consider Equity Release as part of the overall financial planning. Borrowing into Retirement is becoming increasingly common, and we look forward to assisting more older homeowners as our team grows.

David Forsdyke has 25 years experience in financial services, including 6 years with the industry regulator (the Financial Conduct Authority) and 2 years as a member of the Equity Release Council’s Standards Board. David leads the Later Life Team at Knight Frank Finance.

The Equity Release Council press release can be found here.

For more information, visit our Borrowing into Retirement page.