Cambridge Centre for Housing and Planning Research
Cambridge Centre for Housing and Planning Research - Scoping Study
There is increasing interest in the role the use of equity release products can play in coping with some of the pressures of an ageing population. CCHPR’s study analyses what is already known about the use of equity release products by older homeowners, to identify what might be valuable for further research. The Equity Release Council’s representatives participated in this study.
The scoping study reviews the understanding and knowledge from research on the use (or not, in most cases) of equity release products by older homeowners. It pulls together findings from the existing literature, reviews different data sets and draws on stakeholder discussions to identify what is already known about equity release in later life, what is missing from the current evidence base and the key research questions that need tackling in relation to likely future policy directions.
Summary of the CCHPR Study Findings:
· Take up of equity release products in general is very small as compared to the potential market. Equity release accounts for a small proportion of regulated mortgage sales, at present, around 2.1% by the number of sales and 0.6% by the value of sale.
· The main uses of the equity released are for home improvements, as an income supplement, for lifestyle reasons, to support family and for debt repayment.
· There is negative public perception of equity release products and providers related to past mis-selling of products in the 1980s and the complexity of the products.
· Further research is needed to better understand the nature of each of the current equity release products and how they affect future decision making once the product has been taken out.
· There are concerns about the effects of equity release on entitlements to means-tested benefits. A significant number of older home-owners have little income, even though they may live in a valuable property. But taking out an equity release product may impact on their right to benefits.
· There are confusions about what releasing equity means for the capacity to leave an inheritance which deters people from taking out a product. But attitudes towards inheritance are changing and it seems that most middle-aged and younger households do not anticipate passing the entirety of their housing wealth to their heirs.
· A key problem is that people often do not plan ahead for older age. Many people substantially overestimate what their retirement income will be and many retirees are now reaching retirement age without the funds they need to meet their retirement income aspirations. There are also increasing numbers of people retiring with outstanding debt.
· One gap identified in the current evidence base is that we do not know what people who enquired about equity release products but did not take them up did instead. There is also little robust evidence analysing how different older people make decisions about their housing wealth and finances in older age and what shapes these decisions.
· The way in which the equity release market will expand in the future in uncertain, partly because of uncertainties about the funding of care for older people. There is public pressure to implement a system which will prevent people having to sell their home to pay for care. The cap on care costs announced in February 2013 will not come into force until 2017 and it will take time for insurance and equity release providers to respond with any new products.
· Research on wealth and inheritance shows that property related wealth is most significant for those with middle incomes. What is evident is that in the last two decades we have seen both home ownership as a tenure and house prices peaking (at different times) with both declining subsequently. This means fewer households have access to property wealth and that the monetary value of that wealth is lower.
· Equity release does not sit neatly within any particular government department and perhaps as a consequence it is an area where this is little policy momentum.
For the full report, presentation and notes from the round table event held in November 2012 go to http://www.cchpr.landecon.cam.ac.uk/outputs/detail.asp?OutputID=294