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Baby boomers are not afraid to turn assets into income

Borrowing money has become part of our day-to-day lives, whether it’s taking out a mortgage, shopping with credit cards, student loans or organising a personal loan to buy a car or a kitchen.

The modern view is that used wisely, credit oils the wheels of economic activity and ultimately helps us enjoy a higher standard of living.

We only have to go back a few generations, to those born and brought up in the inter-war years, to find a time when credit was tight and borrowing was a big deal.
For these traditionalists it was a their own parents, to be able to live within your means.

Attitudes changed after the Second World War, driven by an increasing appetite for home ownership.

By the time the baby boomers reached adulthood they were comfortable using mortgages to access the benefits of home ownership.

Rising house prices resulted in their properties becoming significant stores of wealth.

We are now at a crossroads that has some important implications for those involved in the equity release market.

The traditionalists are well into drawing their pensions now while the baby boomers are reaching retirement in the form of a demographic bulge that will see a record 800,000 people celebrate their 65th birthday this year.

This will be a catalyst for growth in equity release because not only are there more potential clients but they are also far more open to the idea of using borrowing to get what they want.

This is not just wishful thinking. It is backed up by research that we commissioned into attitudes towards equity release across those both at and in retirement. Results of the research will be unveiled soon.

The older generation have expected their home to be the inheritance they leave their children and, by living within their means, many have achieved this.

By the time baby boomers reached adulthood they were comfortable using mortgages to access home ownership

Those who dipped into their home value often did so as a one-off, to give some financial help to their children, make alterations to their home, or for a once-in-a-lifetime holiday.

The squeeze on pension incomes and rising costs of care are making it more difficult to make ends meet and equity release is becoming a way to boost regular income, using the drawdown facilities of lifetime mortgages.

Those traditionalists who are fixated on leaving an inheritance often find their own grown-up children, today’s baby boomers, are now the biggest cheerleaders for equity release.

Most do not want to see their ageing parents scrimp in their final years but are not in a position themselves to give financial help.

Many baby boomers who have done well on property will not have been so lucky with their pensions.

At retirement, fewer will be able to rely on inflation-proof final salary schemes and those needing to buy their own pension income may find annuity rates subdued.

Yes, they will probably work later in life and many will consider downsizing, although the costs and inconvenience may put them off.

It is inevitable that they will come to see their property as part of their overall wealth and to look for intelligent ways to turn those assets into a regular income.

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