Mortgage News Equity Release Approved By Three Quarters Of Children
28 August 2008 / by Rachael Stiles
Most people do not expect to receive an inheritance from their parents and almost three quarters would be happy for them to take out an equity release plan, research from Saga has found.
While most of today’s over 50s – the baby boomer generation – hold traditional goals such as paying off their mortgage, building up savings, and passing on their wealth to their children, the majority of today’s adults are happy for their parents to take out an equity release mortgage if it means they enjoy their retirement more.
Saga Equity Release found that 72 per cent would not mind if their parents opted to release value from their home, thus lessening the amount they stand to inherit, and two thirds of these wouldn’t mind how they spend the money raised by an equity release scheme.
However, one fifth who would be in favour of equity release would be concerned about how their parents would spend the money, with 18 per cent not wanting them to spend it on extravagances such as speedboats, and 16 per cent disapproving of the money going to charity.
Generally, children seem in favour of their parents boosting their retirement income, but that doesn’t mean that they would not appreciate the inheritance if it came their way – 68 per cent said that their expected inheritance will make a significant difference to their lives, and with house prices rising above inflation, it comes as little surprise that 20 per cent of 18-34 year olds would use an inheritance to get themselves on the property ladder.
For this group, any sign of an inheritance could be a long way off, but equity release
could allow their parents to use the money for a child’s deposit on a house now, when they really need it as the average deposit required continues to climb. More than a quarter of this demographic expressed their desire to receive such a ‘living inheritance’.
“The new generation of retirees are bucking tradition and no longer believe their children have an automatic right to inheritance.” said Andrew Goodsell, chief executive of the SAGA Group. “They are using the money from equity release to enjoy their retirement.”
Meanwhile, Prudential Equity Release has found that homeowners aged 65 or older have £726billion of equity in their homes. Even though the current falling value of property causing this figure to drop by £7.7billion between February and May of this year, it increased by £12.7billion between June 2007 and May 2008.
Keith Haggart, director of Lifetime Mortgages at Prudential said that “Although most retired homeowners have seen the value of equity in their homes fall in recent months, it’s important that they don’t lose sight of the bigger picture which is that despite current falling property prices, in the vast majority of cases retired homeowners have built up a significant amount of equity in their homes over a number of years.”
© Fair Investment Company Ltd