A study by independent equity release advisor Key has found that 20% of older home owners are using equity release to repay mortgages, with another 30% using it to repay unsecured debt.
Equity release is a way to unlock the value of your property and receive cash, which can be spent however the home owner chooses. It’s available for over 55s, allowing them to release some of the equity tied up in the value of their homes. The study by Key has shown that so far this year, £1.68 billion of equity has been released.
According to Key, mortgages were the biggest single debt burden for its customers. On average they were releasing equity to clear £87,181 on their homes. Freeing up cash by borrowing against the equity in the home, and clearing mortgages is becoming increasingly popular with the over 55s.
Stevie Wilkie, Managing Director of equity release specialist Responsible Life has said:
“With a long-term increase in property values, the home has become many people’s most valuable financial asset. Equity release is giving these people the chance to capitalise on their equity, rather than seeing it build up on paper.”
However, rather than spending this equity release on holidays or home improvements, the study by Key suggests that over 55s may be relying on it to pay off debt. Some over 55s could have more than double the average amount of unsecured debt. With an average of £10,319 on credit cards and £13,578 on loans, it could be that older homeowners are dependent on equity release.
The cost of repayments from mortgages and credit cards can take a substantial bite out of monthly income before other living costs are even considered. The study predicts that the result of these debts burdening older people could result in the lending market for over 55s almost doubling over the next decade.
