Recent research has revealed that mortgage advisers who are qualified in providing expert advice on equity release products believe this product will become even more important in the near future.
The research, conducted by Stonehaven, a provider of these products, showed that 74% of advisers questioned believe demand for equity release will increase very soon.
This is largely linked to pension reforms that are due to come into force in April 2015. This is the time when it no longer becomes a requirement to buy an annuity when an individual’s pension pot is released. Instead, pensioners will have the freedom to decide what they wish to do with their pension. As such they will be able to decide which changes they want to make to their financial position.
Will equity release become the next big thing?
Many experienced advisers think so. Indeed, this same body of research has revealed an impressive 64% (just shy of two-thirds of those questioned) believe equity release products will become the next big thing in the financial product area.
Many believe the ability to make independent choices over retirement finances will prove to be good for the market as well as for the individuals and couples who are retiring next year. It is believed by many experts in this field that people will begin to look at their homes in a different way. Instead of focusing just on a pension as a way of funding their retirement (a pension that may fall short of expectations) more people may start to consider their homes as well.
This is where equity release comes in – providing people with the option to release some of the equity they have built up in their properties over the years. In doing so they have the ability to fund their retirement and have the lifestyle they really want, as opposed to struggling to get by on a day-to-day basis.
Focusing on travel
Many potential reasons were suggested for how people will spend their money if they do opt for equity release. However 61% of the advisers who took part in the survey believed travel was the most likely reason to release capital from a property. The next most popular reason was to spend the money on children and also on grandchildren.
Other possible reasons include using this source of cash as a way to resolve the money worries that can be caused by having an interest-only mortgage in place. Some have had such a mortgage for many years and are now facing the prospect of needing some cash to pay off the remaining principle amount that is still owed to the bank.
Clearly there are many potential reasons why the over-55s might consider equity release in the coming New Year. When the pension reforms come into play in April 2015, we may well see many changes in the way people handle their pension pots. This is also likely to have an effect on the equity release market.