Homeowners are taking cash out of their homes to boost their retirement income at the quickest rate since 2004, suggests new figures.
Mortgage equity withdrawal (MEW) rose to £14.6bn in the last quarter of 2006 – from £12.2bn in the previous three months - according to the statistics from the Bank of England.
In total, £49.7bn was released from homes in 2006, up from £36.6bn in the previous year.
MEW allows homeowners across Britain to release equity tied up in their property to pay it back at a later date and is often used to make home improvements or pay off debts.
A spokesperson for Yourmortgage.co.uk says increasing property value means this will continue.
“More and more older people are turning to equity release mortgages to enable them to free up some of the value in their properties,” he says.
“And, as the population continues to get older, and property continues to increase in value, this trend is certain to continue.
“Thousands of older people are asset rich but cash poor. If you have a substantial amount of money tied up in your main asset that you want to get your hands on, you could always sell up and buy a smaller home.
“But many older people would rather not sell the family home.”
Equity release accounted for 6.7% of post-tax income during the final quarter of 2006, up from 5.5% during the first three months though still well below the 9% peak in 2003.
Increasing mortgage equity withdrawal has coincided with sluggish real income growth, which has hit a 25-year low, and a falling appetite for unsecured borrowing, which fell 15% last year.
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