Analysis from lender Pure Retirement shows that 25% of its borrowers release equity to improve their home, while a further 25% use plans to repay their debts.
The proportion of borrowers using equity release to repay debts has risen by 4% quarter-on-quarter and 3% since Q2 last year.
The percentage of homeowners using equity release for home improvements has remained the same.
Holidays, gifting and car purchases continue to round out the top five most popular reasons, with each representing around 9-10% each.
Drawing down cash for improvements
For drawdown borrowers, home improvements continue to be the primary reason for releasing funds, at 27%. At 19%, debt and mortgage repayment continues to remain the second-most popular reason.
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Holidays remain the third-most popular use of funds among drawdown customers, with a 14% share representing a 4% uplift compared to overall figures.
Lump sum customers continue to use released funds for more needs-based reasons. Some 30% are withdrawing finance to repay debt.
Establishing a contingency fund is also the fourth-most popular reason among this group, accounting for 8% of all new lump sum customers in Q2.
Paul Carter, CEO, said: “These figures continue to underline the importance of offering a holistic product offering that can cater for both aspirational and needs-based borrowing, with primary borrowing reasons now evenly split between home improvements and debt repayments. The divergent borrowing habits of lump sum and drawdown customers similarly emphasise the different roles these types of products offer, and the varying needs they can cater for.”
Equity release lending contracted by 6% quarter-on-quarter to £504m during the first three months of this year, market data showed. Figures from the Equity Release Council (ERC) revealed there were 14,216 borrowers in the market in Q1, with 55% taking a drawdown plan.
New drawdown borrowers tend to take out larger loans than lump sum customers, with an average loan of £114,911 for drawdown borrowers compared to £103,492 for lump sum borrowers.
Related: Equity release borrowers save nearly £300m with voluntary repayments
This article first appeared on our sister site, Mortgage Solutions, here.
