About two thirds of Scots who take out equity release mortgages are using the money released from their homes to pay off existing debts and mortgages.
According to equity release provider Key Retirement Solutions – which gave the data to The Scotsman – 62.9 per cent of homeowners in Scotland are using equity release as a way of paying off debts including mortgages.
This makes Scotland the second most likely place where people are motivated by debts to unlock cash from their property, with Northern Ireland being the most likely place for homeowners to cite this as their primary reason for taking out an equity release scheme.
Across the UK, the most common reasons given by homeowners for using equity release include making improvements to their home or garden, and using the money to go on holiday is also a popular incentive.
The fastest rising motivation for taking out equity release is to help children or other members of the family Key Retirement Solutions found, with a third of plans in the UK now sold for this purpose.
Director of Key Retirement Solutions equity release, Dean Mirfin, told The Scotsman that this is also largely due to the effects of the credit crunch. "Pensioners are obviously feeling the crunch but they are seeing the fact that their kids are feeling it even more." he said. "However, everything points to an increase in people using the money to repay their debts, particularly among the younger clients in their late fifties."
There is also the fact that an increasing number of people are retiring before they have finished paying off their mortgage, with around 1.4million homeowners aged 55 plus still paying off mortgages, the terms of which still have at least 10 years left, The Scotsman reported.
More and more homeowners aged 55 or older are turning to equity release schemes as a way of funding their retirement as the credit crunch takes its toll on household finances, with inflation rates of about five per cent hitting the elderly, according to the Alliance Trust, and interest rates hitting their pensions and savings.
Just Retirement equity release announced an 11 per cent increase in sales of lifetime mortgages or home reversion schemes during the last six months of 2008, compared to the same time the previous year.
And experts predict that this rise is set to continue into 2009. Hodge Lifetime equity release found that 60 per cent of IFAs expected the number of completed schemes to increase by at least five per cent this year, as homeowners find a more urgent need for the equity locked in their properties.
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