More use equity release to help relatives
More use equity release to help relatives
The number of retired homeowners using equity release to help cash strapped family members has nearly doubled over the past year, according to market research published on Wednesday.
Equity release schemes allow older borrowers to unlock cash from their homes with the debt, plus interest, only repaid when the borrower dies or goes into a care home.
But instead of using the funds for themselves, 35 per cent of those taking out equity release schemes in the first quarter of this year used the cash to help a family member, according to a market report by Key Retirement Solutions.
This figure compared with 19 per cent in the same period in 2009.
“It is striking that pensioners are more confident about using their wealth to benefit others rather than having to use the money for themselves,” said Dean Mirfin, business development director at Key Retirement Solutions.
“Despite falls in property values over the past couple of years many find that they can comfortably raise the amounts they need from the current wealth tied up in their homes.
The report, based on the KRS’s own and industry data, found that home and garden improvements remained the most popular reason for equity release loans.
Just under a quarter of pensioners were using equity release funds to pay off non mortgage debts. Nearly 20 per cent used cash from equity release to pay down their home loans.
The average amount released dropped slightly from £45,000 in Q1 of 2009 to £43,000 in the same period this year, the report found.
The figures also showed an increase in popularity of equity release schemes which allowed borrowers to drawdown on their funds, rather than take funds as a lump sum.
The figures collated by KRS also showed a big increase in the numbers taking out equity release plans, in spite of the fact that at least six big name providers had withdrawn from the market over the past year.
Those considering equity release are advised to seek independent financial advise as as equity release can impact on entitlement to state benefits and the value of an estate left to children and other beneficiaries
Category: Debt & Financial Services
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