Equity Release and Home Equity Loans in the UK

Alex Parsons Alex Parsons | Secured Loan Expert

Equity release has been in a state of flux since the housing crash. Why? Because home equity is directly tied to property values. Equity increases as property values go up, and vice versa. It is a reality that affects everything from standard home equity loans to equity release programmes that some people use to top up their retirement income.

As a homeowner yourself, you might be wondering what the future of equity release and home equity loans in the UK looks like. Suffice to say there are plenty of reasons to be optimistic. For example, a Key Retirement report released earlier this year shows that equity-based lending volumes were up some 26% in 2016. Total volume exceeded £2 billion.

According to the report, the total number of new equity-based lending products offered in 2016 was 27,666. That represents a 17% increase from the year before. The report estimates that equity lending will go up another 28% to a volume of £2.75 billion this year.

What does all this mean to you? It means that there are enough combined lenders and borrowers with confidence in the economy to significantly boost equity lending in the coming year. With that much confidence, good things are bound to happen.

Remember to Define Your Terms

One thing we do want our readers to be aware of is the need to define your terms when you're thinking about releasing the equity in your home. 'Equity release' means different things to different people, depending on their financial goals. The most frequently used means of releasing equity are as follows:

  • Home Equity Loan ?? A home equity loan is a secured loan that can be used to finance virtually any purpose. Home equity loans are very popular among property owners who want to consolidate their debts or pay for much-needed home improvements. But you could use a home equity loan to pay for a trip, contribute to a child's university education, or even pay for elective medical care.
  • Remortgage Products ?? Though a traditional remortgage product isn't the same thing as a home equity loan, it is a way to release the equity in your property in order to obtain a more affordable mortgage. Remortgage products are popular among older property owners trying to get out of previously obtained interest-only mortgages.
  • Equity Release Programmes ?? Lenders offer a number of equity release programmes that allow older property owners to use equity to provide retirement income even while continuing to live in their homes. There are two different kinds of equity release programmes available to meet retirement income goals. They should be used with caution, however.

All three forms of equity release are obviously contingent upon the amount of equity a borrower has to work with combined with things such as credit score, income, etc. Of all three, the traditional home equity loan represents the largest share of equity financing in the UK.

Good Deals Are Out There

The increasing volume of equity lending is a sure sign that banks and building societies have money they're willing to put in circulation. That's a good thing. When lenders are willing to lend, they tend to compete for a limited pool of borrowers. And you know what that means: there are plenty of good deals out there for consumers willing to shop around.

The future of equity release and home equity loans in the UK looks good, at least in the short term. If you've been thinking about borrowing against the equity in your property, now could be a perfect time.

Sources:

Mortgage Strategy ?? https://www.mortgagestrategy.co.uk/equity-release-hit-2-1bn-2016-will-2-75bn-2017-key-retirement/

Instantly compare 950+ of the UK's best secured loans

Rates from as low as 3.75%