Alice Watson is head of marketing, insurance, Canada Life
The ability to release equity from your property has long been a way for individuals to realise their goals without having to move out of a home they love.
We know that the funds they receive are often used to pay for long-dreamed of holidays or home improvements. However, it can also be a way to support other family members, or clear residual mortgage debt. In short, it can be lifeline for many without requiring a change in lifestyle.
With coronavirus transforming the world in a matter of months and turning many lives upside-down, many are looking to equity release for different reasons than before.
For example, a fifth of customers applying in the first quarter of the year wanted to use some or all of the money released to go on holiday. The last three months showed a 5% decline.
Conversely, requests for money to pay for day-to-day living have actually risen by 5%, to 22% of applications, when compared to the first three months of the year.
At a time when job security is falling and international travel is only starting to open up again, it is perhaps understandable to see this emerging shift in financial priorities.
Alongside this and maybe inevitably, given the amount of time we have all been spending at home recently, using the money to make improvements to the home is still the most popular reason provided.
The percentage of applications for this purpose has grown by one per cent to represent two-fifths of all applications in the last three months. Requests to fund home adaptations, to make a home safer or more comfortable have also increased by 2%to account for 9% of applications in the last three months.
This chimes with a recent survey conducted by Safestyle which found that more than half of the population are prioritising home improvements as lockdown measures continue to ease.
We can also begin to see the possible effects of the government’s coronavirus policies on home finance applications. For example, the percentage of requests being made to clear existing mortgages has dropped by 10% in the last three months when compared to the first quarter of the year.
It feels reasonable to suggest that people may instead be opting to take a mortgage payment holiday instead of clearing the outstanding balance in full. When this initiative comes to an end it will be interesting to see if applications return to ‘normal’ levels.
Ultimately, there are many hypotheses that can be drawn from the reasons people apply for home finance and it is likely to be too early to draw any long-term conclusions on the effect of coronavirus. However, what we do know, is that the pandemic has certainly disrupted existing patterns in why people are choosing to tap into their property wealth.