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Tuesday 13th October 2009
Pensioners use equity to pay off debts
One in three retired people who unlocked equity from their home used the money to pay off credit card and loan debts during the third quarter, research has shown.
Around 36% of people who took out an equity release plan during the three months to the end of September did so to pay off debt, a quarter more than during the second quarter.
There was also a 50% jump in the number of pensioners using the money to pay off their mortgage at 23%, according to equity release group Key Retirement Solutions.
The group said the equity release market had shown further signs of recovering during the third quarter, with the number of plans taken out rising by 19% compared with the second quarter to 6,123.
There was also a 13% rise in the value of equity that people unlocked, with £214 million released during the period.
The group said the increase to both measures built on the recovery seen during the second quarter, when there was a 9% rise in the number of plans taken out and a 3% increase in their value.
But despite the overall value of equity release growing during the third quarter, the average amount unlocked by individual homeowners fell to £39,095 from £40,762.
The decline is likely to be due to a combination of falling house prices, which have reduced the amount of equity people have in their home, as well as a rise in the popularity of drawdown plans, under which people release money in stages.
Around 65% of all equity release plans taken out during the quarter were drawdown ones, up slightly from 64% during the previous three months.
Dean Mirfin, group director of Key Retirement Solutions, said: "The continued growth in the number and value of plans throughout 2009 is very encouraging."
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