Pensioners unlock £455m in equity release plans

Retired homeowners took out equity release schemes worth 455m during the six months to the end of June, 22 per cent more than the amount they unlocked during the same period of 2009, according to equity release adviser Key Retirement Solutions.

The group attributed the steep increase in the money unlocked through the schemes to renewed confidence in the housing market, following the price rises seen since the second quarter of 2009.

It added that many pensioners had also faced an income squeeze due to low interest rates and rising inflation.

Equity release enables retired people to take out a mortgage against the value of their home, which does not have to be repaid until they die or sell the property.

The number of equity release schemes taken out rose by 5 per cent year-on-year during the six months to the end of June to 10,318.

Drawdown plans, which enable people to unlock money in stages, remained the most popular type of equity release schemes, accounting for 72 per cent of all sales.

The average age of some- one unlocking equity from their home was 69 during the first half of the year, up from 67 in 2009, while people unlocked an average of 42,555 each.

Dean Mirfin, group director at Key Retirement Solutions, said: "Housing wealth is an important source of income for pensioners and certain to become even more important as pension income continues to be squeezed.

"The strong sales performance is underlined by the fact that the number of firms competing in the market looks to be turning the corner in a positive direction after recent withdrawals."

The main reason people gave for unlocking equity continued to be to fund home improvements, at 60 per cent, while 36 per cent used the money to go on holiday and 33 per cent used it to repay debt.