OAPs continue to unlock home equity

7 July 2008 03:13pm

Retired people are continuing to unlock money from their homes despite the current problems in the housing and mortgage markets, research has showed.

Just over 8,000 equity release plans were taken out during the second quarter of the year, 7% more than during the same period of 2007, according to equity release advisors Key Retirement Solutions.

At the same time the amount of money people unlocked from their home rose by 13% year-on-year to £390 million.

The group said the figures, which are based on its own business which accounts for nearly a third of the market, showed that demand for equity release remained strong despite the problems in the wider mortgage market caused by the credit crunch and house price falls.

But despite the increase during the second quarter, the number of plans taken out during the first six months of the year was 5% lower than in 2007, although the value of lending rose from £667 million last year to £683 million during the past six months.

Equity release enables retired homeowners to access money tied up in their property without having to move.

They can do this either by taking out a lifetime mortgage which is repaid when they die or finally sell their home, or by selling a proportion of their property to a home reversion company.

Drawdown policies, which enable homeowners to take the money they need in stages, remain the most popular option, accounting for 59% of the market - a 9% increase compared with the second quarter of 2007.

But standard lifetime mortgages, where people draw the cash in one go, continued to decline in popularity to make up 37% of the plans arranged, compared with 46% a year ago.

The main use for the money unlocked through equity release was for home and garden improvements at 59%, while 38% of people used the cash for a holiday, 34% used it to repay debts and 20% wanted the cash to help family and friends.

© The Press Association