Lifetime mortgage lender Pure Retirement has revealed an evolving trend in how customers are using released equity. According to its recent analysis, during the first half of 2023, customers have increasingly been releasing funds for more “aspirational” reasons. This trend is consistent across initial advances, cash releases on drawdown plans, and additional borrowing through further advances.
Among new customers, home improvements continue to be the predominant reason for releasing equity, making up 24% of application volume, a slight rise from 22% in 2022. In a similar vein, the use of released funds for mortgage and debt repayment stands as the second most popular reason, albeit showing a marginal decrease to 21% from 22% the previous year.
Interestingly, holidays have moved up the ranks from being the fifth most popular reason in 2022 to third place in 2023, signalling a heightened consumer willingness to use released equity for lifestyle choices. Car purchases remain steadfast in the top five reasons for both years.
Scott Burman, head of distribution at Pure Retirement, said: “These latest figures point both to the changeable nature of the market, and to the diverse customer base the later life lending sector currently serves.
“While staples such as home improvements and debt repayments have remained popular, the rising consumer interest in things such as holidays demonstrates the wide array of lifetime mortgage uses and increasing customer confidence to use released funds for these means.”
Drawdown customers continue to primarily use their cash releases for home improvements, although this has dropped to 40% from 46% in 2022. Holidays remain in second place but have seen a 2% decrease compared to last year.
Living expenses have newly entered as the third most popular reason for drawdowns, suggesting a shift towards using equity for daily living expenses. Car purchases, although still popular, have slipped from third to fourth place in popularity.
For those taking out additional borrowing via further advances, home improvements are again the leading reason, with holidays jumping from the fourth most popular reason in 2022 to second place in 2023. Creating an emergency fund and paying off debts maintain their positions at third and fifth respectively.
Despite previous predictions of an increase in gifting due to rising mortgage rates and the ongoing cost-of-living crisis, this has not materialised in 2023. Among new customers, gifting has shifted from being the third most common reason for releasing equity to fourth.
Burman added: “On the flipside, we’re also seeing a rise in people using their drawdown facility for day-to-day living expenses, highlighting the need for continued product innovation to ensure ongoing later life lending solutions that are able to meet a variety of circumstances and needs.”
