21st October 2014
Older home owners are benefitting from house price increases to withdraw record sums from their properties, new figures reveal.
A record £1 billion was released from properties by over-55s in the first nine months of 2014, up by 20 per cent on the same period last year, according to the Equity Release Council.
The average value of equity release lending also hit a new record in the third quarter of 2014 by reaching £67,467.
Many retirees have seen dramatic increases to the value of their homes, but have been less lucky when it comes to the size of their pension pots, so releasing equity is becoming more commonplace.
Nigel Waterson, chairman of the Equity Release Council said: “The latest lending figures show equity release is proving an invaluable financial planning solution for over-55s approaching retirement as pension savings fail to cover rising costs. We’ve seen record breaking growth this quarter as the value of lending exceeds all previous benchmarks.”
Geoff Charles, chief executive of Bower Retirement Services, the adviser, said: “In the short term, a base rate rise is a little further over the horizon than anticipated – meaning savings rates will still be low for a time yet.
“But while money stuck in savings accounts is staying static, house prices have been steadily building and many homeowners have seen their housing wealth grow.
“Equity release is allowing them to capitalise on this income, and to turn locked away wealth into a useful asset.”
The Financial Ombudsman Service, which settles disputes between customers and financial services companies, said that while complaints about equity release are relatively low, it still receives a number of cases concerning the products.
In one instance it found in favour of a consumer who was suffering from throat cancer when the mortgage company failed to switch her loan to interest-only as agreed.
In another case a couple complained that they had not fully understood the terms of the lifetime mortgage they were sold by an equity release adviser and the Ombudsman found in their favour.
In a further example, a borrower complained that they should have been advised of the option to use their pension lump sum instead of taking out an equity release loan, which the Ombudsman agreed was poor advice.