OneFamily

Equity Release set to replace the “Bank of Mum and Dad”

Posted in: Corporate

  • Equity release is set to grow, as older relatives use it as a means to support education and social mobility for their families
  • One in five over 50s (20%) – the equivalent of five million people – would consider releasing money from their home to help younger relatives
  • With houses increasing in value, almost half of over 50s would consider releasing equity to help their children (48%) or grandchildren (48%) get on the property ladder
  • Concern over cost-of-living is another key driving factor – one in five parents (18%) would consider using equity release to help their child cope

Over five million over 50s (20%) are expected to release wealth from their properties to help younger relatives, as house prices keep rising and the cost-of-living crisis bites.

Research from financial services company OneFamily finds that almost half of over 50s considering equity release (48%) say that levelling the playing field and helping their families to buy a property is their key motive.

Education is another driver when it comes to using the wealth stored in bricks and mortar to give family members a leg-up. Forty-two percent of grandparents who say they would consider equity release, state they would use it to support their younger relatives’ studies. This is predominantly amongst grandmothers, with over half of them (57%) willing to pass on their wealth for this reason, compared to 31% of grandfathers.

As the rising price of essential goods affects the vast majority of UK households2, nearly one in five parents (18%) would consider using equity release to help their child cope with the cost of living. Meanwhile, 15% would consider doing so to help them pay off debts.

The average equity release customer drew the equivalent of more than seven years of retirement income from their home in 20213. This is set to grow even further, as parents and grandparents consider the importance of their home’s value in closing the generational wealth gap.

Funds from equity release would supplement vast sums of money already being passed on to younger family members. Nine million UK adults aged 50 and over have given a lump sum of money to either their children or grandchildren since the start of the pandemic, with a total of £155bn4 largely going towards property or education costs.

Matthew Ellis, Head of OneFamily Advice, said: “This is the start of a big change in the way that family wealth is viewed and passed onto younger generations to enable social mobility. In the future I think the bank of Mum and Dad could rely on the value stored in the property that they live in.

“House values have risen considerably over the last few years so, for the older generation, bricks and mortar are often where the majority of their wealth is held. Meanwhile parents and grandparents can see their younger relatives are struggling to afford an education or to get onto the housing ladder, with house prices continuing to spiral upwards.

“Equity release isn’t right for everyone, but lower interest rates and no negative equity guarantees make giving a living inheritance to support family members an easy and attractive option. The older generation can see the benefit that a lifetime of hard work can bring to their younger relatives, without having to downsize and move from the family home to be able to afford to do so.”

Notes to Editors

Unless otherwise stated, all research conducted by Opinium, on behalf of OneFamily, between 2nd – 8th March 2022, among a nationally representative of the over-50s UK population.

  1. When asked whether they would consider releasing equity to help their children and grandchildren, a NET total of 20% have agreed, the equivalent of 5,039,413
  2. Recent ONS figures show 83% of adults in the UK reported an increase in their cost of living in March 2022.
  3. According to research from Equity Release Council.
  4. According to ONS, the UK has a population of 25,197,069 adults over 50 years old. Research states that 26% have passed on a lump sum of money to children, and a further 10% to their grandchildren – a total of 36%. 25 mil x 0.36= 9,070,944. The total sum per person offered to both children and grandchildren equates to 17,189. 9,070,944 x 17,189 = 155bn