2m live the good life on homes

MORE and more homeowners are using the wealth locked up in their properties to fund their old age. They have turned to equity release schemes because they have failed to take a private pension or save enough for their retirement.

The amount borrowed against houses though such schemes has soared 50-fold since 1993, it is revealed today.

The money is often used by younger borrowers to fund home improvements, buy a second home or a car. But it is estimated that at least a quarter of the money raised through equity release is now spent on funding a comfortable old age.

Traditionally, parents have left their homes to their children on their death. However, more are now raiding this inheritance.

The simplest option for the elderly is to sell the family home and move to a smaller property in a cheaper part of the country.

However, equity release allows them to raise a lump sum without selling up. The sum can be invested to provide an income to supplement the state pension. This sum is later repaid with interest when the house is sold on their death.

Research from retail analysts Mintel shows there have been 11 years of growth in the equity release market, taking the total borrowed to £1.2bn. It said 11% of home owners have released equity in their home, amounting to almost two million households. Around 500,000 will be using the cash for their old age.

Nineteen per cent of all other home owners say they are considering raising money this way. One in four of these said the main driving force would be to provide a regular income in old age.

Mintel analyst Paul Davies said: 'Current market conditions mean that the equity release sector is ripe for further growth. 'Rising life-expectancy, the erosion of state pension support and inadequacies in company and personal pension provision mean that many people are looking for alternative ways to fund their twilight years.

'On top of this, many older people are becoming increasingly asset-rich but cash-poor. In other words, although they own their own home, which is often worth a considerable amount of money, they have to survive on relatively modest incomes, which means they may look to generate additional income from the home through an equity release scheme.