More over-55s using equity release to fund retirement

Growing confidence in the housing market and the need to supplement retirement income is causing a large rise in the number of over-55s turning to equity release to free up cash from their homes.

The research from Key Retirement Solutions found that more than £508 million was released from equity release plans in the first half of 2013 - up 12 per cent from the same period last year. The average customer released £55,272 from their home.

Equity release enables borrowers to quickly raise money from their home. Typically, homeowners do not make monthly payments but instead incur fixed-rate interest payments over the life of the loan which is then cleared when the property is sold or the homeowner dies.

Around 21 per cent said they used equity release to clear mortgage debts, particularly interest-only mortgages - many of which are due to mature in the next few years. Home and garden improvements and family holidays were also popular uses of funds.

Group director at Key Retirement Solutions, Dean Mirfin, said that customers were becoming more confident about making use of their property wealth in financial planning.

He said: "The sales trend is firmly up with plan sales continuing to expand. But the values released continue to grow faster than plan sales reflecting the increase in average amounts released."

"Equity release is playing a major role in helping retired homeowners maximise retirement income which is particularly needed when customers need to find the best solutions in the face of low interest rates and low annuity rates."