According to a recent report, older people are turning to their equity funds to generate income to pay off their debts. As a result many of them are living at modest incomes and struggling to maintain their homes.
The report compiled by the University of Birmingham and titled Housing and Finance in Later Life shows that more than a third of equity release customers used the extra cash to help clear their debts, while almost half have put it towards essential house maintenance.
The study further reveals that a quarter of those surveyed have used equity release to make early bequests and large one-off purchases. The remaining three-quarters, on the other hand, have used the capital for reasons such as increasing their financial security, enabling a more comfortable retirement or paying off their debts.
Louise Overton of the University of Birmingham and the author of the report said the research showed that equity release does not play much of a role in lifting pensioners out of poverty. “This suggests a need for more consideration of how those with very low incomes and limited housing assets might benefit from equity release should they wish to use it, " she said.
Age UK has found these findings to be very disturbing and said that it was worried that many older people were finding it difficult to maintain a decent standard of living using their pension alone. The recession and rising inflation has further exacerbated this problem with many older people seeing their living costs rise as their savings and incomes fall.
Michelle Mitchell, Age UK's charity director, said: “Equity release is clearly a useful tool to ease financial pressures in later life, but anyone considering it as an option should first seek good quality information and advice. "
There are many debt management plans that you can avail to pay off your debts without resorting to extreme measures. Those considering releasing equity funds to generate capital to pay off their debts should first seek expert debt advice .
ClearStart aims to help solve debt problems rather than allowing them to perpetuate. Recommendations are based on the individual situation and all advice is free. The website www.clearstart.co.uk offers practical advice for people and there is a ClearStart debt helpline available on 0800 093 92 12.