Interest-only mortgages have helped drive the equity release market to a record high, figures reveal.
Property wealth paid out £633m to pensioners during the first quarter of 2017 – up from £414m for the same period last year, while the number of plans rose from 5,447 to 8,604.
The data, from Key Retirement’s first quarter Equity Release Market Monitor, revealed more than one in five (22 per cent) customers used property wealth to clear mortgage debt in the first three months of the year.
People are on average releasing £73,610 of property wealth, increasing to as much as £117,000 in London.
Most of the wealth is being used to fund home and garden improvements, with 62 per cent of customers releasing money to enhance their homes, nearly a third (32 per cent) using the cash to fund holidays and 30 per cent clearing credit card and loan debt.
But the use of equity release for mortgage repayment is expected to increase, with around 10,000 borrowers a year between now and 2020 coming to the end of interest-only loans.
The average price of houses used for equity release was £322,400 – around 50 per cent more than the average UK house price of £217,502 – and almost £600,000 in London.
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