Over-55s using property wealth to clear outstanding debts

Over 40% of the total amount of new equity released – or £588 million - was used to clear some form of borrowing with mortgages (53%) followed by credit cards (47%) and loans (36%).

Typically borrowers owed £53,388 on their mortgages, £11,640 on credit cards and £12,728 on loans.

Over-55s in Yorkshire and Humberside (49%), London (47%) and Wales (47%) use the largest proportion of the equity they have released to repay debt while those in the North East (29%) and Scotland (32%) use the least.

Londoners (76%) use more equity than any other region to repay mortgage borrowing – potentially due to the capitals high house prices – while those in Wales (24%) are most likely to repay credit card borrowing and those in the North East (19%) to clear loans.

With 56% of equity release plans allowing adhoc capital repayments and 38% facilitating regular payments to service interest and so avoid costly roll-up, Key says customers can find that they are better able to manage their borrowing through these flexible product features.

Will Hale, CEO of Key, said: “While most people want to reach retirement debt free, this is simply not the case for everyone – especially those who have taken out interest-only mortgages and now often face finding a substantial lump sum to repay the balance. In H1, over £500 million worth of borrowing was repaid using housing equity – allowing people to retire with confidence, without the burden of needing to make regular monthly payments or facing the prospect of having to sell their home

“With equity release rates starting from under 2.5% and many products allowing adhoc capital repayments or ongoing interest repayments, these flexible plans allow people to proactively manage their borrowing and shore up their finances. Something that is arguably more important than ever given the current economic uncertainty.”