THIS year many people faced financial strain due to the turbulent nature of the pandemic. However, certain industries have managed to maintain steady business and even had a boost. Scotland’s equity market went through an unexpected increase. How does this compare to the rest of the UK?
Equity Release Explained
Firstly, what is an equity release? It is where homeowners over 55 can unlock the cash value of their property. They can receive money in one lump sum, several small payments, or a combination of the two. The most common kind of release equity is a lifetime mortgage. This loan is secured against the home and allows for cash to be drawn-out when required. There are advantages and disadvantages to each kind of plan. This is why it’s important to get expert help on equity release.
Key recently released it’s Quarter Three (Q3) equity release market report. It highlighted that they had resumed more normal trading conditions. £884 million was released over this financial quarter. This was a significant boost from Q2 ( £521 million) when people were first hit by the pandemic. Across 12 monitored regions in the UK, Scotland saw the largest increase, with a growth of 8%. To put this in to comparison, the second-highest growth was in the North-West where their equity market increased by 3%. In other regions, the market remained relatively unchanged.
Equity funds can help people struggling with their finances, and it’s worth exploring where people were spending their money. Will Hale, Key CEO, said, “Those who did take out equity release used it for a variety of reasons including repaying debt to make themselves more financially secure and helping to support their wider families.” This ties in with findings from earlier this year. It was revealed that over 40% of equity payments were used to pay off debt.
Kinds of Debts
Where does Scotland tie into that figure? Compared to other regions, over 55’s in Scotland have a lower average percentage of people using their equity funds to repay debts. For instance, Yorkshire and Humberside had 55% of people using equity for this purpose, whereas Scotland only had 32%. Mortgages were the most common use of equity funds for people in Scotland, with 68% of people using their equity funds to help pay them off.
The equity market, just like any other, has certainly had an unpredictable year. It’s hoped normalcy will resume. Mr Hale said, “There will be tough times ahead, but the market remains strong and will continue to evolve to ensure that products and advice services are well-positioned to help customers use their housing equity to navigate through later life.”
What do you think the future has in store for the equity market going forward?