Two-fifths of equity release funds are used to repay debt
Two-fifths (41%) of all of the equity released by older homeowners in the first half of 2020 was used to pay off their debts, according to Key.
The equity release adviser said that borrowers used their property wealth to retirement-proof their finances.
Over 40% of the total amount of new equity released – or £588 million – was used to clear some form of borrowing with mortgages (53%) followed by credit cards (47%) and loans (36%) being the most common repayments made.
Borrowers owed an average £53,388 on their mortgages, £11,640 on credit cards and £12,728 on loans.
Over-55s in Yorkshire and Humberside (49%), London (47%) and Wales (47%) use the largest proportion of the equity they have released to repay debt while those in the North East (29%) and Scotland (32%) use the least.
Londoners (76%) use more equity than any other region to repay mortgage borrowing – potentially due to the capitals high house prices – while those in Wales (24%) are most likely to repay credit card borrowing and those in the North East (19%) to clear loans.
Will Hale, CEO at Key, said: “While most people want to reach retirement debt free, this is simply not the case for everyone – especially those who have taken out interest-only mortgages and now often face finding a substantial lump sum to repay the balance.
“With equity release rates starting from under 2.5% and many products allowing adhoc capital repayments or ongoing interest repayments, these flexible plans allow people to proactively manage their borrowing and shore up their finances. Something that is arguably more important than ever given the current economic uncertainty.”