Nearly 60% of equity releases are taken out for home improvement

According to Aviva, home improvement is the most common reason for taking out equity release and accounts for 59% of all equity release purchases.

Research based on Aviva customers who took out equity release products over the last three years (period from 1st July 2015 to November 2018) also reveals:

  • On average customers take out 20% of the value of their home
  • The median property value of customers who took out equity release is £250,000

The equity release market has been growing continuously since 2011, with the rate of growth accelerating since 2014, according to data published by the Equity Release Council. In 2017, the total value of the equity release market in the UK reached £3bn for the first time. There are several reasons for the observed growth of this type of loan, but two factors have been identified as the key drivers for increased demand: rise in property prices over the last two decades and concerns about pensions providing sufficient income during retirement.

Customers typically have more than one reason for taking out an equity release mortgage. After home improvement, debt-related reasons (i.e. debt consolidation or mortgage pay off) were cited as the second most common reason for taking out Aviva equity release, accounting for 44% of equity release customers. One-off purchases such as holidays or cars were the third most common reason for purchasing Aviva equity release products (39%), followed by Gift to family or friend (19%) and Estate Planning (including funeral costs) (18%).

Customers with property valued up to £300,000 accounted for nearly two thirds (64%) of home owners who purchased Aviva equity release products, and 28% having properties valued between £300,000 and £650,000. However, property prices are subject to significant regional variations, with over a third (34%) of properties in Central London being valued at over £1,000,000.

When it comes to the ratio between loan and property value, Aviva equity release customers were most likely to take out a loan of up to 20% of the value of their home (58%). Loans equivalent to 20% to 30% of the value of the property accounted for 25% of Aviva equity release purchases over the last three years, while only 17% of customers asked for a loan above 30% of the value of their home.

Greg Neilson, Retirement Managing Director, commented:

“The reasons for taking out a loan are varied but customers are increasingly turning to equity release to improve their retirement. Equity release is attractive to some because there is no obligation to make any repayments until the homeowner no longer lives in the property, meaning there are no monthly payments to keep up with.”


Kindly shared by Aviva