The number of customers taking a lump sum equity release advance has rocketed in the last year, driven by the looming interest-only mortgage crisis.
According to the latest figures from Key Retirement, 40% of customers took out a lump sum advance to reduce their debts in the first quarter compared to 30% a year ago.
Key Retirement said this surge is being driven by customers who need the maximum cash available rather than drawdown as they are using the lump sum to pay off shortfalls in interest-only mortgages.
Dean Mirfin, technical director at Key Retirement, said: “The record high number of equity release plans being taken out underlines how property wealth is an important part of retirement planning.
“Pensioners are making the most of successful property investment and rising house prices to substantially improve their retirement standard of living. However retiring in debt is still a major issue.
“It’s long been predicted that as the first large wave of interest only mortgages maturities begins more customers will turn to equity release to plug this gap.”
Nearly a third (29%) of customers used some or all of the money to pay off unsecured borrowing on credit cards or loans, while 21% used some or all of their money to clear outstanding mortgages.
Total property wealth released rose to nearly £415 million, up from £341 million last year.
The average amount released is £76,000 and as high as £134,000 in London.
Equity release can be used to gain access to the wealth tied up in your property without having to sell or move home. It is designed for older homeowners who own their property outright or have relatively small mortgages to pay.
You can borrow against the value of your home, sell it or part-exchange it for a lump sum or a regular monthly income.
The data comes after the Equity Release Council’s recent record first quarter figures.
According to the Equity Release Council, the total value of equity release lending grew by 21% in the first quarter of 2016 to a record £393.9 million.
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