Business

Equity 'being used to pay debts', says Age UK

Monopoly piece on cash
Image caption There has been an injection of equity in general in recent times

Some pensioners are unlocking equity from their homes as a last resort to use to pay off debts, a report has found.

Others are using it to pay for a more comfortable retirement and some are using the money to hand down to their family or make big purchases.

The conclusions come in a report by an academic for charity Age UK.

But since the start of the downturn, there has been a general trend of injecting rather than releasing equity.

UK homeowners increased the value of their stake in their properties by £22.3bn last year, the latest Bank of England figures showed.

They reflected continued decisions by homeowners to pay off more of their mortgages, unlike the previous 10 years, when homeowners had borrowed £327bn against the inflated value of their homes.

'Pressures'

Age UK argues that during tough economic times, pensioners were finding it more difficult to live on a pension, and their savings were getting only small returns. Some were using equity release to pay for things such as home repairs.

The research reports on the experience of a relatively small sample of 533 equity release customers.

"The ageing of our society is a triumph of modern life, yet brings with it some real challenges," said Michelle Mitchell, Age UK's charity director.

"Equity release is clearly a useful tool to ease financial pressures in later life, but anyone considering it as an option should first seek good quality information and advice."

The author of the report, Louise Overton of the University of Birmingham, said: "It does not play much of a role in lifting pensioners out of poverty."

However, those who took the option were usually satisfied with the value for money offered in an equity release plan, the report found.

Laurie Edmans, chairman of Ship, the equity release trade body, said: "The feedback within the report shows that there is a high level of satisfaction amongst equity release customers - a ringing endorsement of an often maligned industry.

"Ship has campaigned long and hard over the years to introduce and support a raft of safeguards aimed at dealing with past problems.

"The no-negative equity guarantee and introduction of specialist equity release qualifications are but two of the steps that the industry has taken to ensure that customers are able to access the equity in their homes with confidence."

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