An increasing number pensioners struggling with the credit crunch and the soaring cost of living are starting to look at equity release schemes to bolster their retirement income, figures from Prudential and Norwich Union show.
Equity release products offer homeowners aged of 55 and older the possibility to unlock the money tied up in their houses, while the owners are still able to live in the property for as long as they wish. In most cases, homeowners take out a lifetime mortgage, which will be paid off once the property is sold.
Providers of equity release
schemes such as Hodge Equity Release have reported a 75 per cent increase in enquiries about their products in the last three months, and Prudential confirmed, compared to 2007, it had a similar increase in the sales of their lifetime mortgages in the first half of 2008.
Norwich Union, the UK's largest provider of equity release products, said it had 'more than doubled' the number of quotations for equity release plans since the beginning of the year.
The reported leap in both enquiries and quotations reflect the financial difficulties pensioners or homeowners nearing retirement are facing in the worsening economic climate, with many struggling to pay their day-to-day bills, let alone other debts they will be even less likely to pay later on in their retirement.
"There's a triple whammy hitting consumers," said Anthony Rafferty from Norwich Union. "First the true cost of living has gone up significantly - inflation at 4.4 per cent doesn't give the true picture, particularly for pensioners.
"Second," Mr Rafferty added, "many struggle, because of the credit crunch to find unsecured forms of lending, or mortgage lending. Third, because of the housing market, it's also a struggle to sell your house."Equity release plans
, including lifetime mortgages and home reversion plans as the two most commonly used schemes, have got a slightly tainted reputation because in the past they had high fees, high interest rates and a low rate of return.
However, since 2004 they have been regulated by the Financial Services Authority (FSA) and reputable providers have committed themselves to a code of conduct. Still, the FSA
advises homeowners to consider all options carefully and has issued a warning that "equity release schemes can be helpful, but they are not suitable for everyone".
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