Video transcriptThe changes that recently came into play will grant full control over pension pots to over 55s, which could see a boost to the equity release market.
Equity release mortgages currently contribute only a minor percentage to UK gross lending, however, recent data suggests the market is already growing.
The Equity Release Council reported a 29 per cent increase in lifetime mortgage lending in 2014 compared to 2013. Furthermore, research from Stonehaven suggests the trend of tapping into property wealth is set to continue.
Over the last six months, over a third of Stonehaven`s customers used their property`s equity to purchase home or garden improvements. Another third used these funds to clear existing mortgages and a fifth released equity for gifts to family members.
Alice Watson, product and communications manager at Stonehaven, says: `The market is growing, and this looks set to continue with new, flexible products helping the industry evolve to meet consumer needs.`
Such products will be developed due to the freedom the government has granted individuals. Now all savers have been given complete control over their retirement funds, an unprecedented move, allowing them the ability to govern how quickly they use their income.
Meanwhile, the government has also created a guidance service to help individuals manage their money, called Pension Wise. It is vital that people get to grips with the tax implications of taking out their pension fund.
These changes should make people assess their wealth in a completely different light ahead of their retirement, and the greater flexibility with pensions could be shifted over to homes too, according to Alice Watson.
She explained that the average person has a significant portion of their wealth tied up in property, but as they are encouraged to view pension pots more flexibly, the same freedom of thought could be applied to the capital their home can provide.
In the right circumstances, it means that borrowers can release money that can make a real difference to their retirement. Furthermore, a key benefit of equity release products is that they are easy to understand and less risky than they once were.
Pricing often includes protection for the borrower against negative equity at the end of the term, which used to be one of the key disadvantages that borrowers faced. In addition, the fixed rate basis of equity release products are all easily understood and transparent, so borrowers won`t get bogged down in a confused mess of technical terms and clauses.
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