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OneFamily launches new Lifetime Mortgage Market Monitor

Posted in: Products

  • The average OneFamily lifetime mortgage customer now takes out over £90,000 in equity release, as the baby boomer generation continues to benefit from the large amounts of equity in their homes
  • Nearly half of lifetime mortgages (41%) are taken out to clear an existing mortgage
  • One in ten (12%) OneFamily customers use the loan to provide a financial gift to other family members

OneFamily has today launched its first-ever Lifetime Mortgage Market Monitor, revealing the trends in how over 55-year olds are using the equity in their homes across the UK. The regular review will be published every six months giving homeowners more insight into lifetime mortgages and what they are being used for across the UK.

Top five reasons over 55s are taking out a lifetime mortgage

The average lifetime mortgage loan taken by a OneFamily customer is over £90,000 and they are using the money for a variety of different reasons[i].

 

Reason to take out a lifetime mortgage Average loan amount Percentage
Clear an existing mortgage £111,729 41%
Consolidate unsecured debts £57,051 17%
Cash gifts to a family member £91,705 12%
Buy a new property £115,293 8%
Home and/or garden improvement £53,606 7%

 

The largest group of customers who are using the funds to clear an existing mortgage may be homeowners who are nearing the end of an interest-only mortgage. While many people use interest-only mortgages to take advantage of a cheaper monthly repayment plan, with the understanding they will pay off the debt later. This can cause issues, as when the times comes they don’t have the funds to pay the capital and are unable to take out another standard mortgage, due to age.

The Financial Conduct Authority (FCA)[ii] recently expressed concerns that one in five homeowners are using such a product, and many of these may not be able to repay what they owe by the time it reaches maturity. For many, a lifetime mortgage may be a solution to this situation as the loan is not income based.

Over 55s taking the largest loan amounts are those who are looking to buy a new property, an increasing trend amongst lifetime mortgages applicants. This could be to purchase an additional holiday home for them and other family members, or to buy a more expensive property, often to be closer to urban areas, where children and grandchildren are based.

Average lifetime mortgage payment by region vs average house price

The average lifetime mortgage loan is also impacted by property values across the country. With the average house price in Greater London now at £484,000[iii], homeowners from the capital who take advantage of a lifetime mortgage are enjoying the biggest pay-out (£177,794), with average payments to those in the South East and East Anglia also above £100,000.

 

Region  

Average loan amount (£)

 

Average house price (ONS) (£)

 

Greater London £177,794 £484,000
South East £149,995 £322,000
East Anglia £132,350 £290,000
North East £80,112 £131,000
South West £75,592 £254,000
North West £65,715 £158,000
West Midlands £56,312 £191,000
Yorkshire and The Humber £55,356 £157,000
East Midlands £54,362 £186,000

 

The monitor further revealed that people are most likely to take out a lifetime mortgage between the ages of 60 and 69 (43%), followed by those in their 70s (30%) and an increasing number of younger homeowners in their 50s (20%).  However, older customers are likely to use the product in a slightly different way to those in their 50s or 60s. Customers who apply for a lifetime mortgage in their 70s are more likely to use it to ensure their affairs are in order. They often want to make sure the money they give to their loved ones is passed on in the most tax efficient way possible, in the form of a ‘living inheritance’.

Nici Audhlam-Gardiner, Managing Director of OneFamily Lifetime Mortgages, commented:

“The baby boomer generation has seen record levels of house price growth and are increasingly using the capital they have built up in their homes over the years. Whether it be an effort to clean up their finances, take on a new project or even lend a helping hand to their nearest and dearest, lifetime mortgages are allowing people more freedom in their 50s and into their later years.

“While some people will be drawn by a need to put their own finances in order, some will want to help their own families succeed in life by giving them a helping hand onto the property ladder and OneFamily research has revealed that 8.6 million parents and grandparents are now part of families that share their money across generations. In fact, over one in ten (12%) lifetime mortgages are now used for a cash gift to family members.

“As intergenerational lending becomes even more commonplace, we anticipate more parents and grandparents will seek to use lifetime mortgages to make help younger family members, as well as give themselves a better retirement.”

Key features of OneFamily Lifetime Mortgages:

  • Allows you to release a cash lump sum
  • You will never owe more than the value of your property
  • You can pay off the interest on the loan and protect the capital in your property
  • The money is only paid back when you die or go into long-term care

[i] OneFamily, Lifetime Mortgage internal data
[ii] FCA review of interest-only mortgages
[iii] Office for National Statistics, House Price Index, UK: December 2017