One in four older homeowners in the South West use equity release to help their family, according to the latest research.
New data from independent equity release adviser Key has found that nearly 1,500 retired homeowners in the South West gave cash to families last year.
Average pay-outs from homes across the South West last year were around £66,000 with more than £420million of property wealth released.
Money gifted to families was typically used to clear debts, pay for significant life events such as weddings or to fund house deposits.
Will Hale, chief executive officer at Key, said: “Retired homeowners in the South West are making full use of the property wealth they have accumulated to enhance their standard of living in retirement and help their families.
“Intergenerational fairness is a hot topic at the moment and increasingly we are seeing people choosing to provide family and friends with the financial boost they need to clear debts, fund university fees and pay for house deposits and weddings. However, equity release is not a single use product and as well as helping family, older homeowners also use it to pay off their own debts, improve their homes or gardens and paying for holidays.
“Good independent expert advice is key to ensuring that older homeowners receive the most benefit from their property wealth and use it in the most appropriate way for them and their families.”
Interestingly, the data found that 65% used equity release to fund home and garden improvements.
However, debt worries remained a concern in the region with 32% of retired homeowners using the money to pay off credit cards or loans with their property wealth, while 23% used it to clear existing mortgages.
Around 30% used some or all of the money to go on holiday.
Commenting on the research, Aj Somal, chartered financial planner for Aurora Financial Planning, said: “l have noticed an interest from clients in relation to equity release. Larger providers are marketing heavily in this area and clients are becoming more and more aware of this area of the market.
“The clients who are asset rich but cashflow poor are more and more interested in this area, but they require specialist professional advice in this area, as it is a life changing decision for them and their family.”
However, Alan Chan, chartered financial planner at IFS Wealth & Pensions, said: “I don’t recall any of our clients doing equity release to help family members. Usually we find they do it to help fund their own retirement and lifestyle, particularly if they’re cash poor and their wealth is locked up in their property.
“I can see why some people may consider doing this to help family members especially in cases where downsizing is not a viable option but also want to help their children to get on the property ladder for example.
“This will also reduce their estate for Inheritance Tax. However, it is an expensive option especially if they opt to roll-up the interest then upon death there may be very little value, or, worse, nothing left at all for the family to inherit.”
Aamina Zafar is one of the UK’s leading financial journalists. She has previously worked as a senior reporter at FT’s Financial Adviser. The award-winning journalist writes regularly on the IFA community, mortgages, pensions and financial regulation.
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