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One in three use equity release to pay off debts

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Retired homeowners are increasingly taking out lifetime mortgages in order to repay credit cards and other debts
One in three use equity release to pay off debts

Equity release borrowers are using their property wealth to clear debts and mortgages, according to adviser business Key.

The equity release firm found that the number of customers using money from their homes to pay off credit cards and loans hit a three-year high of 35% in in the first quarter of this year, up from 30% a year ago.

In addition, 28% used their property wealth to clear outstanding mortgages compared with 21% in 2018.

Lending is up

New lending rose to £839.58 million in quarter one of 2019, with a further £340.42 million in new potential drawdown facilities also arranged.

This takes the value of the market to £1.18 billion up from £1.03 billion in the first quarter of 2018 (£777.1 million initial advances and £252.9 future potential borrowing).

The number of equity release plans sold also rose – 6.6% year on year to 11,190 compared with 10,495 in the first quarter of 2018.

Customers released an average £75,032 during the three months, with six in 10 using the funds to pay for home and garden improvements. Around a third (31%) pay for holidays while 30% use some or all the cash to help family.

Will Hale, CEO at Key, said: “Nearing or entering retirement with an income that might be exceeded or matched by debt repayments can be hugely stressful and may mean people need to make fundamental changes to their plans such as working longer.

“However, this will not solve everyone’s issues and is not even viable for some so looking into downsizing, equity release or other later life lending options might be the right answer. Not only will making sensible choices around property mean that people are less stressed but it will help to set them up for a more comfortable retirement in the future.

“Good independent expert advice is key to ensuring that older homeowners receive the most benefit from their property wealth and use it in the most appropriate way for them and their families.”

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