The equity release market is booming, with record amounts of money being withdrawn in the second quarter of 2022. New statistics from the Equity Release Council show that £1.6 billion of property wealth was released in the second quarter of this year, surpassing the previous high of £1.53 billion from the previous quarter.
So, what is behind this huge surge? And how does equity release affect your probate application and family inheritance? Here’s everything you need to know from a team of experienced probate solicitors:
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What is Meant by Releasing Equity?
When you hear the term ‘releasing equity’, it simply means accessing the cash that is tied up in your home. So long as you are 55 or over, you can release equity through numerous policies, which give you access to the equity (cash) locked up in your property.
As a rule, you can either take the money you release in smaller amounts over time (known as drawdown), receive it in one large sum, or both.
How Does Equity Release Affect Family Inheritance?
Most people take out equity release as a mortgage that is not paid off until they die. This means that it is a decent but expensive approach to raising money if you have no one to leave your estate to.
However, the downside of equity release is that it leaves less value within the property for heirs to benefit from when your estate is distributed, reducing their inheritance severely. Moreover, you won’t be able to leave a property to a loved one in your will, as the rules of equity release state that the property must be sold when you die.
What did the Equity Release Council Find?
Below are the key takeaways from the Equity Release Council:
- Homeowners of 55 and over took out 12,485 new equity release plans between April and June in 2022 – equal to 205 plans per day. On average, a new plan sits at £135,000 in value, with returning customers taking out approximately £13,506 each.
- Just over half of new plans agreed during this period were lump sum lifetime mortgages, making it the first time since the first quarter of 2009 that new customers chose lump sum lifetime mortgages over drawdown lifetime ones.
- The total amount of property wealth released in the first six months of 2022 came to over £3.13 billion – up by 36% compared to the previous first half record of £2.3 billion in 2021.
- The total number of new plans taken out from April to June (12,485) is up by 26% compared with the second quarter of 2021, but still below the fourth quarter of 2018, which recorded 12,891.
- The data shows that demand for equity release has quickly recovered from the effects of the pandemic, with new lending records seen in the last three quarters.
Why is There a Surge in Releasing Equity?
There are a number of reasons why people are choosing to release equity from their homes. For some, it is a way to raise cash to pay off debts or to make home improvements. For others, it is a way to supplement their income in retirement.
The Equity Release Council suggested that the recent upward trend towards lump sum products is likely resulting from the desire to share property wealth and gift money to younger family members. What’s more, a number of homeowners are likely using equity release to generate extra income in order to deal with the UK’s current cost-of-living crisis.
How Legacy Wills and Probate can Help
To understand how releasing equity might affect your family inheritance, you will need to speak to a qualified wills and probate solicitor.
At Legacy Wills and Probate, we are dedicated to helping people get through the probate process and to preserve as much of the deceased’s estate as possible. We are experts in estate-planning and probate services, offering whatever guidance and legal support that is needed.
For more information on how we can help, don’t hesitate to get in touch. Call our friendly team on 0333 344 4325, or email us directly at sales@legacywillsandprobate.com, and we’ll get back to you as soon as possible.
