We can report today that the equity release market appears to have passed £1bn last year, a 16 per cent increase on 2012 with figures from the Equity Release Council showing the average equity release customer borrowed £56,917.
The size of equity release loans were the highest level since 1998 as more older people turned to their homes to get money.
In the last three months of 2013 the average loan rose to £60,938, representing 25 per cent of the average property value on average.
More than 10,000 customers took out equity release plans in the second half of 2013, releasing £594.3m which is the highest six month figure since 2008, when £577.4m was released.
What is equity release?
Equity release still has a challenged reputation after misselling scandals have seen older people being treated unfairly. The concept itself allows older people to take money out of their home and repay it when they die, which is a controversial process.
So, if a pensioner takes out 25 per cent loan to value equity release product on £100,000 home, they get £25,000. That’s the easy part.
The next part is that interest is charged every year the person is alive so the loan increases in size.
When the person dies the loan must be repaid and the property is taken as a security. The controversy is that relatives can end up leaving little to their families in inheritance.
It is only available to those in later life and is often used as a last measure to standard mortgages for pensioners for those who wish to take cash out of their property and spend it during their lifetime. It can be taken as a lump sum or as regular income. With private savings at crisis levels many are looking at their property as an alternative form of retirement income.
ERC data shows two-thirds of customers opted to take regular income through drawdown plans, with the remainder choosing to take a lump sum payment.
With house prices rocketing and pension saving so low, it is not surprising to see property plugging the retirement gap.
Equity release is one property option, remortgaging is another and so is owning buy-to-let property.
There are a number of ways you can earn a retirement living form property and mortgage and financial advisers can help you do it.
With the yield on investments so low and house prices rising 7 per cent in the UK in 2013, residential property has proven attractive to some.
Our advisers can explain how you can use your property to access cash and enjoy your retirement.
Perhaps you want to refurbish your home, give the children or grandchildren their own house deposit or pay for long-term care.
We are specialists in pensioner mortgages and understand the concerns many have. We can talk through your options and decide what is the right move for you.