Thousands of home owning pensioners are being forced to use their homes as cash machines as they turn to equity release to help fund retirement plans and pay care bills.
According to the Equity Release Council, between July and September this year, more than Â£375 million was borrowed by pensioners â amounting to Â£4million a day.Â Within three months the average amount of Â£67,467 was lent to the over 55s, reaching a new record high.
Equity release is an expensive type of borrowing which lasts for life.Â Known as the âlifetime mortgageâ it allows the retired (minimum age 55) to take out loans against their property in return for a cash lump sum or regular small payments.Â In most cases there are no monthly repayments, however the loan is repaid if a person dies, goes into care or when the house is sold.
An equity release loan is seen as the last resort in retirement, as loan companies charge large amounts of interest on the total amount of the loan. Â Â However because of the current savings crisis, many old age homeowners have very little to fund their retirement, with pensioners in their sixties and seventies especially turning to the âlast resortâ scheme.Â Over five thousand people this year have taken out equity release loans â the largest number for six years.
Nigel Waterson, former Conservative MP and chairman of Equity Release Council said âThese figures show equity release is proving invaluable for the over-55s approaching retirement as pension savings fail to cover rising costs.Â Rising house prices also mean that customers have a growing pool of equity at their disposal.â