Bridgewater reveals most popular reasons for equity release

The most common reason for people to release equity in their homes is to repay the mortgage, according to Bridgewater Equity Release.

The company analysed all the applications it has received over the last three years and found that this alone accounted for 30% of equity release applications in 2009. The next most popular use for the money was home improvement, with 17% of applicants citing this as their reason for releasing funds last year. In third place was debt consolidation, accounting for 15% of applications.

However, there were many other reasons for releasing equity. Almost double the number of people planned to use the money for vehicle purchase in 2009 compared with the previous year, with almost one in ten customers making this their priority. Around 6.5% planned to buy a holiday home or property, up from 0% just two years earlier, and a further 6.5% simply wanted to improve their quality of life.

Fewer people planned to use the funds to give to others last year, Bridgewater found, and spending the money on travel also became less popular. No customers used their equity as an emergency fund or to fund long-term care in 2009, however, the company believes this pattern could alter in the coming years as changes to state funding are made and social care policy is reviewed.

Head of sales and distribution at Bridgewater Equity Release, Peter Welch, said: “As a provider of home reversion plans, it is important we understand the reasons why our customers choose to release equity through their home. This is also the case for equity release advisers; by understanding the motives of the client they can best direct their marketing effort to those customers with the appropriate needs.”

Mr Welch said he expects the top-three motivations to remain the same in 2010 and believes more people are likely to use the money to repay mortgages or debts because of the recession. “That said, equity is being released in greater numbers to increase retirement income and enhance a customer’s lifestyle, while a growing number are choosing to purchase vehicles and property,” he added.