Whilst UK homeowners increased the value of their stakes in their properties by £3.2bn home equity releases by pensioners were used to fund debts.
A recent survey by Age UK suggested that equity withdrawal was still being used by some sections of society as a last resort to pay off debts, or to find money when savings are being whittled away.
Some pensioners are unlocking equity to pay for a more comfortable retirement and some are using the money to hand down to their family or make big purchases, the report said.
The charity said that during tough economic times, pensioners were finding it more difficult to live on a pension, and their savings were getting only small returns. Some were using equity release to pay for things such as home repairs.
However, unlike the Bank of England’s figures, the Age UK research only reported on the experience of a relatively small sample of 533 equity release customers.
At the height of equity withdrawal in 2003, the process of borrowing money against the rising value of homes was adding nearly 9% a year to the post-tax income of the entire UK population.
In the first three months of 2010, some 1.3% of the post-tax income of the population has been taken out of the economy because people decided to reduce their mortgage debt instead.
Low interest rates, as well as people’s fears of future debts or job losses, have led homeowners to pay off their mortgage faster than previously. As a result, these repayments have outstripped equity release.
