A third of equity release customers use the funds raised to repay debts, new figures have shown.
The fact that a third are using equity release to clear debts, and almost half are paying for essential house maintenance, suggests that retired homeowners are struggling financially says Age UK, which commissioned the University of Birmingham to carry out the research.
Contrary to the popular view that equity release customers use the money unlocked from their home to take that cruise of a lifetime, three quarters have used it to boost capital ion order to increase their financial security, enable a more comfortable retirement, or as a last resort to relieve financial difficulty and debt.
Only a quarter of those surveyed for the Housing and Finance in Later Life report said that they have used equity release to make early bequests to family members or large one-off purchases.
While two thirds of the over 65s are homeowners without a mortgage, many of them are surviving on low or modest incomes and struggling to maintain their homes on their retirement income.
Some of the respondents said they felt they had to use equity release in order to meet maintenance costs and remain living in their home, something important to many older people who do not want to move away from family, friends, and local amenities, or simply do not want the upheaval and expense of moving house.
Age UK is concerned that the UK's older generation are finding in increasingly difficult to maintain "a decent standard of living" once they retire, because their pension does not stretch far enough.
A combination of higher living costs and lower income from savings and investments, as a result of the recession, has exacerbated this problem, the charity said, and argues that this is why the average age of equity release customers is falling, now at 72.
Meanwhile, the average age that people are clearing their outstanding debts is rising, with 25 per cent of people approaching state pension age having outstanding debts.
Commenting on the research, Michelle Mitchell, charity director of Age UK, said that "Equity release is clearly a useful tool to ease financial pressures in later life," but, she urges anyone considering it to seek equity release advice.
Louise Overton, from the University of Birmingham and author of the report, said that the research "suggests a need for more consideration of how those with very low incomes and limited housing assets might benefit from equity release should they wish to use it."
Laurie Edmans, chairman of the equity release trade body SHIP, said "with 97% of respondents saying they felt satisfied that the plan they took out was the right one for their needs, this study goes a long way towards dispelling some of the myths about equity release."
She said that the no-negative equity guarantee and introduction of specialist equity release qualifications are among the steps that the equity release industry has taken to "ensure that customers are able to access the equity in their homes with confidence."
Ms Edmans added: "When this new report is considered alongside evidence from the Pensions Policy Institute and the SHIP discussion paper, the case for equity release to be seen as a standard part of retirement planning is serious and close to becoming irrefutable."
© Fair Investment Company Ltd
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