Equity release increasingly used for gifting



Customers taking out equity release products through home reversion specialist, Bridgewater Equity Release, are increasingly using the cash in order to gift it to friends and family.

The number of customers saying they will gift some or all of the money to beneficiaries such as children and grandchildren, has doubled over the previous year according to Bridgewater’s latest research of plan take-up.

Bridgewater has analysed the reasons given by customers when taking out a plan in order to understand how the released equity will be used.  When a plan was completed customers were asked to choose all the potential uses they had for the cash.  Bridgewater looked at the information provided by customers between August 2011 to 2012 and compared it with the previous 12 months.

Over the past 12 months a number of reasons given increased dramatically in popularity including gifting, using the money to supplement income and maintain lifestyle, and funding long-term care needs – although the popularity of this last option still remains relatively low.  Using equity release to fund a divorce settlement was also a reason cited by considerably more customers in 2011/12 than the previous year.

However, the top three intended uses for the cash on taking out a Bridgewater home reversion plan remained the same.  They were to:

  1. Repay a mortgage (32%).
  2. Fund home improvements (31%).
  3. Pay off and consolidate other debts (25%).

The number of customers intending to use the money to repay a mortgage fell 12% from the year previously and funding home improvements fell 2%.  Other major reasons cited by customers included: funding travel; to purchase a car; or to have as a rainy day/emergency fund.  One of the more unusual reasons given was to buy a boat.

Chris Prior, Business Development Manager at Bridgewater Equity Release, commented:

“It’s clear that our latest data on the anticipated uses of the cash released by our reversion plans evidences a number of ongoing changes in the reasons why customers are increasingly opting to release equity.  In these days of ‘living wills’ many more individuals are opting to use the equity stored in their homes in order to gift money to children, grandchildren and other loved ones.  We are in no doubt that the struggles many younger people are having in finding sufficient deposit money to purchase a home is having a major impact on why customers opt for equity release.  Gifting as an option increased by over 100% in popularity over the previous year as did the ability for plan holders to supplement their income and maintain their lifestyle.  Again, we believe there is a clear pattern emerging where those reaching, or in, retirement are using their equity in order to boost pension income which may not be anywhere near enough to fund their existing lifestyles.

“That said the three most popular reasons cited remain the same as the previous year which goes to show that equity release appears to be a consistent option for those looking to repay a mortgage, improve their home, or consolidate and pay other debts.  Along with the increase in gifting perhaps the most interesting point to make is the increase in using equity release to fund an individual’s long-term care needs.  With the completion of the Dilnot Commission into social care funding complete and the Government looking likely to take on the proposals, we believe equity release will play an even greater part in funding long-term care needs in the future.”