The advisory firm said this boom was partly fuelled by closures and restrictions on interest-only deals. As a result, many existing customers have struggled to meet new criteria and penalties imposed on their contracts.

While many retirees were happy to continue servicing the interest, Dean Mirfin, group director at Key Retirement Solutions said many pensioners were “trapped” in interest-only deals.

Mirfin warned many customers were unable to move deal or lender and faced a mounting increase in interest rates.

However, he added: “Innovation in the market is continuing with the launch of plans designed to help clients tackle the issue of funding interest-only mortgages into retirement.

“Plans are now available enabling clients to pay interest and release funds which is a direct response to the interest-only ticking time bomb problem.”

Mirfin also said the equity release market has seen a rise in the average amount released last year boosted by increased sales of plans. He attributed this to ‘increasing confidence in the sector’.

The average customer taking out an equity release plan in 2012 released £52,268 – a 7% increase on 2011’s £49,000 due to the continuing squeeze on retirement income.