Gen Xers set to spearhead an equity release boom in 2022: should you consider it?

Rising house prices and financial pressures could see Gen Xers turn to equity release to fund their living costs in 2022. Read on to find out more.

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Equity release, the financial product that allows homeowners to unlock the value of their home, could see a huge upturn in 2022. This is according to financial broker Norton Finance, who says that rising house prices, the increased cost of living and adverse employment conditions could see many Gen Xers turn to equity release in 2022.

Here’s what Gen Xers need to know about equity release, including its benefits and drawbacks, as well as potential alternatives.

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[top_pitch]

What has happened with Gen Xers recently?

According to Norton Finance, the pandemic has disproportionally affected Gen Xers and older workers in general. Some have been put on furlough, while others have had their incomes slashed or been made redundant. Here are a few stats that highlight the adverse employment conditions for older workers during the pandemic:

  • 25.4% of employees aged 55-64 were furloughed during the pandemic, along with 30.9% of those aged 65 and above.
  • The number of unemployed over 50s was 22.2% more in September 2021 than at the start of the pandemic.
  • 11% of over 50s made redundant during the pandemic left the job market entirely.
  • 14% of older people had lower incomes at the end of 2020 than they had before the pandemic.

What’s the likelihood of Gen Xers turning to equity release to fund their living costs?

Events of the past 20 months, including adverse employment conditions, rising costs of living and pension policy changes mean that many Gen Xers are facing an uncertain and potentially difficult financial future.

As a result, many are likely to begin considering new financial steps that they may not have considered previously or sooner than they had planned.

For those who are homeowners, Norton expects many to progressively turn to their homes as a way to supplement living expenses.

[middle_pitch]

What do Gen Xers need to know about equity release?

Equity release is typically available to those over the age of 55.

For some of the nearly one million Gen X-ers who will turn 55 in 2022, equity release could be a great way to access funds from their most valuable asset – their home – and use it to fund their living expenses without having to relocate.

But equity release is not without its drawbacks. According to Norton Finance, homeowners must understand that an equity release plan isn’t just free cash.

It is a plan that will take value out of your house. It will therefore have a direct impact on what you can leave to your beneficiaries as an inheritance.

You may also be charged compound interest on some equity release products, meaning the amount you owe can become greater than with other loans. Equity release also comes with a number of fees that you must ensure you can afford. That is why you need to do your research before you commit.

It may be a good idea to seek the advice of a qualified equity release financial advisor. They can assess your situation and advise you on whether this is a viable option for you.

To find a qualified equity release adviser, head over to the ERC member directory.

What are good alternatives to equity release?

If you come to the conclusion that equity release is not appropriate, you have other options to raise cash. 

One is to downsize. Downsizing can give you extra cash that you can use to fund your expenses. A smaller home also means lower utility bills, home insurance and maintenance costs.

If you do not fancy moving to a smaller place, another good alternative is renting out a portion of your home to generate regular income.

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