Pensioners urged to seek advice before releasing equity and spending inheritance funds

Rip Off Britain highlights issues surrounding equity release loans

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This adds up to seven years of a typical person’s retirement income.

David Burrowes, of the Equity Release Council, said: “After years of putting money away in bricks and mortar, older homeowners are turning the tables and taking funds from their homes in order to boost their retirement income, meet one off costs and gift a living inheritance to family.”

He continued: “With £1 million added to the value of UK housing every minute last year, the options afforded by property wealth will feature in many people’s thoughts as they make financial plans for the future.

“The equity release market’s return to growth is part of a wider pick-up in later life lending activity, and the flexible design of modern lifetime mortgages gives customers more ways to manage their finances and access life-changing sums of money at a lower cost.

“While many aspects of today’s market have been transformed in the 30 years since consumer safeguards were first established, firm foundations remain in place so no customer need ever worry about owing more than their home is worth and can rest easy in the knowledge they can remain in their home for life with no threat of repossession for not keeping up with repayments.

“As we move into an environment of growing cost-of-living pressures, the importance of rigorous advice will be greater than ever so that decisions to release equity continue to provide long-term satisfaction as well as short-term relief.”

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Meanwhile, homeowners with equity release schemes could save more than £50,000 by switching to a cheaper plan.

Interest rates have halved in recent years but lots of people don’t realise they are free to switch.

Executive director of Age Partnership Matt Stirland said people could make huge savings by switching providers.

He said: “Age Partnership customers who switched plan last year will save a staggering £51,000 in interest over the average 16 year term of their plan.”

Pensioners should weigh up their options when it comes to releasing equity and also consider downsizing, according to Money Saving Expert Martin Lewis.

Mr Lewis said the easiest and cheapest way for pensioners to free up money was to move to a smaller house.

He was responding to a caller, named Dee on This Morning in December who asked: “How can elderly people who have houses that are mortgage free release some of this equity to spend on themselves instead of struggling in later years?”

Martin said: “I’d always start by saying look to see if you can downsize.

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The financial journalist continued: “That’s the easy and cheap way for many people.

“Move to a smaller house and because you’re moving somewhere smaller you release the equity that way.”

Mr Lewis explained that he’s never been a big fan of equity release mortgages, although he understands that some time they are a necessity.

He concluded: “If you’re going to do that take as little as you need when you need it.”

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