Record £13m of equity was released from homes PER DAY in 2021, as older homeowners battled to keep up with cost of living crisis
- House price boom has seen value of Britain’s properties increase by £1trillion
- Older homeowners are using this equity to help fund their retirements
- Some £4.8billion was unlocked in 2021, with average lump sum worth £125,000
- But campaigner warns of ‘insidious’ roll-up of interest on equity release loans
Draw-down cash: Susan Wilcox
Older homeowners could be forced to cash in on the £1 trillion house price boom to ease the cost-of-living crisis as inflation hits a 30-year high.
They pulled a record £13 million a day out of property last year as the pandemic sent prices spiralling.
In all, £4.8 billion was unlocked — with the average lump sum worth £125,000.
Susan Wilcox, 73, is one of those who turned to equity release.
Her new-build house in Aylesbury, Buckinghamshire, had risen in value by 35pc since she bought it in April 2014. The £66,000 increase could prove a lifeline.
Divorced, she has no private pension, and redundancy in May 2020 from her payroll manager job left her living on her monthly state pension of £915.
So in 2021, Susan took £70,000 out of her house with SWR Equity Release. She used £28,000 to clear her credit and store cards, pay fees and boost her savings. The rest is there for emergencies, rising bills or treats such as a holiday.
She says: ‘My only option to boost my income was to release money I had tied up in this building. I may have to dip into it if my energy bills or food costs double this year, but I’ll try not to.’
Equity release allows homeowners aged 55 and over to take tax-free cash out of the value of their homes. But the loans — repaid when the borrower dies or goes into care — have compound interest charges that can quickly eat away at the value of your home.
They can also come with heavy exit charges. Stuart Powell, of broker Ocean Mortgages, says there is ‘panic’ among older homeowners. Many are taking more than initially planned through equity release to cope with living costs.
The lowest equity release rate is 2.75 per cent, up from 2.25 per cent last year. The average rate is 4.10 per cent — which would turn a £125,000 loan into £231,000 over 15 years.
Andrew Morris, of broker Age Partnership, says equity release is used to clear mortgages by homeowners needing more disposable income.
But Baroness Ros Altmann, a campaigner for the elderly, says: ‘The fear is people… do not recognise how insidious the roll-up of interest is.’
Jim Boyd, Equity Release Council chief executive, says: ‘Property wealth will remain an important part of the picture for funding retirement in the years ahead.’