Home improvements top the shopping list for thousands of older people who release money from their properties when they reach retirement, according to figures released by Norwich Union.
Home improvements top the shopping list for thousands of older people who release money from their properties when they reach retirement, according to figures released by Norwich Union.
Research by the company, which has launched a new equity release product allowing people to get cash out of their homes, also shows that nearly half of customers opt for new cars or holidays.
And with the equity release marketing increasing more than tenfold over five years1 and continuing to boom, the signs are that more and more people are taking advantage of the opportunity to turn their financial wish lists into reality.
But the money doesn’t just go on luxuries – a quarter of people put some aside for a rainy day, or invest for future needs such as long term care.
Norwich Union equity release plans work by unlocking a proportion of the value of a property from a property by way of a mortgage. The customer retains ownership of their home, and has nothing to repay during their lifetime unless the house is sold or they need to go into long term care.
Norwich Union asked more than 2500 of its equity release customers2 how they spent the money. The results were3:
- Home improvements – 54%
- Investing for future needs – 25%
- Holidays – 23%
- New cars – 22%
- Living expenses – 16%
- Pay off debts – 10%
- Gifts – 7%
Norwich Union’s latest equity release product, the Index Linked Cash Release Plan, has a minimum eligibility age of 55 – the lowest minimum age limit within the market – so people don’t have to wait until retirement to unlock the capital from their homes.
The loan-to-value ratios are higher than for previous products, so more cash can be freed up. This has been made possible by the introduction of a new interest rate structure. The interest rate is linked to the Retail Price Index, and includes the added protection of a maximum rate, currently 10.14 per cent.
Norwich Union has also relaunched its existing fixed rate Flexible Cash Release Plan with an improved benefits package.
Daren Carter, head of equity release marketing for Norwich Union, said: “Equity release is becoming more and more popular as people understand the benefits it can offer.
"They are realising that it is not a 'last resort' way of raising money, but a valid and effective way of making the most of an asset they have worked for most of their lives to buy – their home.
“Equity release is a key part of financial planning for retirement, and we are now offering alternative types of product so people have a choice according to their needs and preferences.”
The Index Linked Cash Release Plan has a minimum interest rate of 4.89 per cent and a maximum interest rate of 10.14 per cent. The actual rate charged will depend on the annual change in the retail prices index.
The Flexible Cash Release Plan has a fixed interest rate of 7.79 per cent.
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Media contact
David Ross, Norwich Union Press Office, 08703 66 68 65
1Source Safe Home Income Plans (SHIP) 2001
2Norwich Union surveyed 2565 customers in 2001
3Many people spend the money on more than one of the things listed, so the percentages given total more than 100
Notes to Editors
- Full written terms and conditions are available on request. Different terms apply for the Flexible Cash Release Plan and the Index Linked Cash Release Plan. Refer to the 'At A Glance' guide for terms and conditions (attached).
- Security will be required. CHECK THAT THIS MORTGAGE WILL MEET YOUR NEEDS IF YOU WANT TO MOVE OR SELL YOUR HOME OR YOU WANT YOUR FAMILY TO INHERIT IT. IF YOU ARE IN DOUBT SEEK INDEPENDENT ADVICE.
- Norwich Union is the UK’s largest insurer. It is the UK’s largest provider of life, pensions and investment products and one of the leading IFA providers. IFAs provide around 75% of the company’s long-term savings business.
- Norwich Union has strategic alliances with over 20 building societies and other leading UK brand names including Tesco Personal Finance and The Royal Bank of Scotland Group.
- Norwich Union’s news releases are available on this internet site
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