Over-55s use homes to borrow £1bn

OlDer people used their homes to borrow nearly £1billion at the start of the year – as soaring care costs fuelled an equity release boom.

A total of £936.2million was withdrawn by over-55s in the first three months of 2019, up 8 per cent on last year.

the money was used for everything from home extensions to helping grandchildren get on the property ladder.

However among the over-75s, 42 per cent of borrowers said they would use the money to fund costs associated with old age – such as adapting their property or paying for home help.

Around 20,400 customers borrowed against their homes in the first three months of the year, the equity release council said. the average customer taking out a lump sum withdrew £97,763.

consumer groups have warned the boom could mean that lenders end up pocketing millions of the inheritance that would otherwise have gone to the borrowers’ children and grandchildren. the typical interest rate for a ‘ lifetime mortgage’ – the most popular kind of equity release – stands at 5.1 per cent, significantly higher than that of most standard mortgages, according to advice website MoneySavingexpert.

But chris Knight, of legal & General retirement, said: ‘ Unlocking housing wealth in retirement is becoming a new normal and retirees are increasingly doing it for a range of reasons.

‘From paying for home improvements to helping kids on to the property ladder and even covering the cost of care, lifetime mortgages are enabling retirees to really use their home as their pension.’

Separate figures from research firm Mintel forecast that a record £5billion could be accessed through equity release this year.

Demand has trebled since 2015, and is expected to keep growing as life expectancy rises and fewer people are able to rely on a generous final salary pension.