Far fewer Scots using equity release to free cash from their homes

Published on Friday 10 July 2009 20:24

THE number of Scots using equity release plans to unlock cash from their homes plunged in the second quarter of this year, according to the latest figures.

Only 205 equity release plans were taken out by Scottish homeowners in the three months to the end of June, a fall of 27 per cent compared with the same period last year but a slight improvement on the first quarter, according to equity release specialist Key Retirement Solutions.

The total value of the property unlocked using equity release plans – which allow homeowners to borrow money against the value of their home, with the debt repaid from the sale of the property after they die – fell by 52 per cent to 5.1 million, reflecting sharp house price falls over the past 12 months.

In the second quarter, the typical Scottish equity release customer was 67 years old and released 29,028 from a property worth 160,461, a value almost 10,000 lower than a year ago.

Homeowners are increasingly using flexible arrangements known as drawdown plans to unlock just small amounts from their property, according to Dean Mirfin, group director at Key Retirement Solutions.

"The positive is the fact that in part the decline in lending values reflects the increasing uptake of drawdown plans where customers can release a lower amount initially and then return for further funds when needed, this can heavily reduce the cost of borrowing for customers."

Home and garden improvements remain the most popular use of equity release across the UK, despite a decline this year in the number of people citing that as a primary motivation. The number using unlocked cash to pay off debts has soared in recent months, while more people are using it to help cover bills.