"..it has taken away the worry"

Older homeowners are turning to the wealth tied up in their property to help them make ends meet. Growing numbers are releasing equity from their homes to pay off loans and credit card debts, or even clear mortgages they are carrying into retirement. 

Bridgewater Equity Release, a specialist in home reversions, says that 43 per cent of its customers last year were releasing money to pay off mortgages while 27 per cent said they wanted cash to pay off other debts. These figures are up from 30 per cent and 15 per cent respectively in 2009. 

A third of those aged 75 or over owe money on their credit cards, for example, according to insurer Aviva. And Prudential found that two-thirds of those due to retire this year were considering carrying on working because of financial pressures. 

For many people it is about helping to maintain a lifestyle, rather than transforming it. In fact we're seeing people in later life hit hard by high inflation and low returns on savings.

One way to free capital from your property is to buy a smaller or cheaper home. But many older people are reluctant to leave the home they feel comfortable in and do not want the expense and upheaval of a move. 

Specialist equity release products instead give them cash today while allowing them to stay in their home for life. These are generally cost-effective only for those 65 or over and are better value from 70 onwards. 

There are two options. Equity-release loans  -  known as lifetime mortgages  -  charge interest on a loan from day one. The interest rolls up and is added to the outstanding debt. The whole debt does not have to be repaid until a property is finally sold after someone dies or moves into care. The longer you live, the higher the interest bill. Rates are fixed for the life of the loan, with today's rates typically between 6.5 per cent and 7.5 per cent. At these rates, the overall debt doubles in roughly ten years. 

Customers can take a lump sum upfront, but most now use a flexible loan that allows them to borrow a bit at a time. Three-quarters of new mortgages are arranged on this drawdown basis.

The alternative is a home reversion plan. This allows you to sell some or all of your home while you retain the right to live there. As the company may have to wait years to cash in, it pays only a proportion of today's market value. 

Peggy and Gordon McGrath, both 70, turned to equity release to help clear debts from his roofing business, which suffered after customers went bust in 2008 and 2009, leaving thousands of pounds of bills unpaid. Peggy, who still works as a part time office manager, says: 'We took out bank loans and had borrowed on credit cards, but it was becoming a huge strain. I was getting phone calls from people chasing us for money and having sleepless nights.' But the couple knew they had wealth tied up in their £230,000 two-bedroom semi in Finchampstead, Berkshire, where they have lived for almost 30 years. 

Last October signed up for a £50,000 equity release plan. Peggy says: 'It wouldn't have been our first choice because I know the loan will grow over time, but it has taken away the worry.'