Equity release hits record amid cost of living crunch

Older homeowners took a record £1.7bn from their properties in the past three months using share release, data published yesterday shows.

They are cashing in on high house prices this fall to make ends meet as a cost spiral, according to the Equity Release Council, which promotes the equity release sector.

More than 25,500 homeowners used their assets in the three months to September, 32 percent more than in the same period last year.

Meanwhile, total lending is up 49 percent year-on-year, with an average of £133,770 taken up in lifelong flat rate mortgages.

Nearly £5bn has been withdrawn so far this year. But thousands could lock themselves in expensive deals after borrowing costs skyrocket.

The average person who takes out £50,000 in 10 years now has to pay £21,606 more in interest than a month ago, analysts Defaqto calculated.

In the past month alone, the average interest rate has risen by 2.2 percentage points to 8.29 percent.

Rates have more than doubled in the past 18 months, from just 2.89 percent.

Equity providers rushed to close deals and raise interest rates after last month’s mini-budget, in line with high street mortgage lenders.

Katie Brain of Defaqto said, “Releasing equity can be a good way to release the money locked up in your property, but with interest rate hikes, the rolled up interest becomes much more expensive.”

Simon Gray, of specialist consultancy HUB Financial Solutions, warned that there was a risk that older homeowners would make irreversible decisions as a result of hasty reactions to rapidly changing financial conditions.