Pensioners are taking 'record' equity from their homes
Money is being used to top up pension income, clear mortgage debt and fund lifestyle

Property-rich pensioners are taking record amounts of equity out of their homes to top up lowly pension incomes and to fund luxuries such as holidays and home improvements, new figures show.
The Daily Telegraph reports data published by the Equity Release Council, the trade body for providers of specialist loans used to release cash from property, which show that more than 5,400 people collectively borrowed a record £384m over the three months to June.
That's an increase of 18 per cent on the previous quarter and 11 per cent on last year. Over the first six months of the year, £710m was released, more than any previous half-year period, according to trade website Professional Adviser.
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'Equity release' is a term used to described borrowing against property, whereby an individual receives cash equivalent to the value of a share of their home and repays the entire amount, plus interest, when the home is sold, typically on death or when they go into a care home.
The most common example is a 'lifetime mortgage', which allows for either a lump sum or regular withdrawals to be taken. While the products provide easy access to cash while allowing the person to remain in their home, they can be expensive relative to standard mortgages, with an average interest rate of a little more than six per cent.
Experts have offered a range of reasons for why equity release is currently on the up. Firstly, the amount of lifetime income that can be acquired by trading in a pension pot for a basic annuity has been falling – it is reportedly down 15 per cent over the past five years. Pensioners are taking cash from their home to top-up "a gap in their income" Nigel Waterson, chair of the Equity Release Council, said.
Others point to new mortgage rules which have reduced lending to older homeowners, suggesting equity release is actually being used by so-called 'trapped borrowers' to clear existing housing debt. Saga head of retirement Alex Edmans said the firm has "seen an increase in the use of equity release to clear a mortgage".
Finally, there are those who simply suggest a surge in property prices in recent years has opened opportunities for retirees to cash-in and fund luxuries. FTAdviser reports the most common use for the equity 'released' from a house is improvement of the home itself, which accounts for some of all of the cash taken by 58 per cent of borrowers, or to go on holiday, which is cited by a further 28 per cent
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