Article date: 21 January 2008
Home improvements are the most popular way to make use of cash obtained through equity release, according to new figures from Norwich Union, a leading provider in the field.
House repairs and refurbishments topped the poll with 29% of Norwich Union equity release customers saying they would spend the money in this way. This was followed closely by a general desire to improve their standard of living (27%) while gifts for family were the third most popular way of using the cash (12%).
The research was compiled from a snap-shot survey of 250 customers who had taken out equity release plans in the last six months.
The complete list of purchase decisions is as follows:
- Home improvements / repairs: 29%
- Improve general standard of living: 27%
- Gifts for family: 12%
- Pay off debts 10%
- Holidays / travel 8%
- Car 7%
- Property 3%
- Mobility aids 2%
- To avoid inheritance tax 1%
- Hobbies 1%
More specific purchases included vets' fees, electrical goods (televisions, radios) and even new teeth!
Dominic Fraser-Smith, group manager for Norwich Union says: "The findings are interesting as they show that most people are using the equity from their homes to make their lives more comfortable and maybe treat themselves to ‘little luxuries', rather than making grand-scale purchases. Many customers mentioned that their plan had provided them with ‘peace of mind', as it had made otherwise difficult purchases possible.
"However, we are starting to see some interesting new trends as the impact of the Baby Boomer generation starts to filter through. Norwich Union offers equity release solutions for people aged from 55 upwards and it would seem these potential customers have a different attitude to debt to many people in their 70s and 80s. Indications are that this new customer segment want to use the equity in their home to fund lifestyle choices, such as travel.
"The research also backs up suggestions that more and more people are struggling with debts in their retirement, with one in 10 equity release customers using the funds to pay off outstanding finances. This then highlights the need to rethink traditional retirement planning options, as many can no longer rely solely on the traditional pension pot for their later years."
An equity release policy will affect the amount of capital planholders are able to leave to their dependents and could affect any state benefits they receive. There are costs involved when taking out an equity release plan.
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About Norwich Union
Norwich Union is the UK's largest insurer. It is a leading provider of life, pensions and investment products and one of the largest financial adviser (FA) providers. FAs provide over 70% of the company's long-term savings business in the UK.
Norwich Union's news releases and a selection of images are available from Aviva's internet press centre at www.aviva.com/media.