A recent study conducted by SunLife has highlighted the prevalence of misconceptions surrounding equity release among homeowners aged 50 and above.
The research, which involved interviews with 2,000 individuals in this age group, revealed that a mere 6% of respondents possessed a comprehensive understanding of all the key facts related to equity release.
Despite the significant advancements made by the industry in recent years to offer safer and more favourable products to consumers, the study found that misconceptions continue to persist.
When participants were presented with a series of basic facts about equity release and asked to identify which ones they knew to be true, a staggering 94% admitted to being unaware of at least one fact.
The most prevalent misconception revolves around the belief that equity release plans restrict homeowners from moving house.
Only 24% of respondents correctly identified that it is possible to relocate while having an equity release plan in place.
Furthermore, less than a third (30%) of participants were aware that certain equity release plans involve no monthly repayments, offer inheritance protection by ringfencing funds, or include a ‘no negative equity’ guarantee, which ensures that one’s estate is never left in debt.
The research also shed light on the reasons behind homeowners’ reluctance to consider equity release, with 57% stating they would not contemplate it.
Misconceptions played a significant role in their decision, with concerns about burdening their children with debt or complications in dealing with their estate being the most commonly cited reasons.
However, it is important to note that providers who adhere to the standards set by the Equity Release Council can offer a ‘no negative equity’ guarantee.
This guarantee ensures that the debt from equity release will never exceed the value of the house, thereby preventing any potential burden on the homeowner’s beneficiaries.
Interestingly, the study found that three-quarters of respondents who had previously released equity reported an improvement in their overall happiness as a result.
In fact, 40% of these individuals stated that equity release significantly boosted their happiness. The main perceived benefits of equity release included the ability to continue living in their own home (57%), receiving a tax-free lump sum of money (50%), and enjoying a more comfortable lifestyle (40%).
Other benefits mentioned by respondents included helping their family, funding holidays and travel, achieving personal goals, and reducing debts.
Mark Screeton, CEO at SunLife, said: “Equity release offerings have changed a lot over the past few decades.
“Today’s offerings are well-regulated by the Financial Conduct Authority and often include product features promoted by the Equity Release Council to protect consumers.
“It’s great to see that the vast majority of those who have released equity feel happier in their lives as a result. Retirement should be a time to relax and spend your time however you choose, and for some people equity release can be a great way to unlock more opportunities in later life.”
