Retired able to free cash from their property

Equity release companies have started the year with a bang, with interest rate cuts making it better value for retired homeowners to unlock cash from their property. Meanwhile, the Government is keen to help pensioners trade down to smaller homes and free up much-needed accommodation for young families.

Equity release allows older property owners to free the wealth tied up in their homes while retaining the right to continue living there. In the last quarter of 2011 borrowers withdrew £216million through equity release. This is the highest level of withdrawals for two years, according to trade body SHIP. Andrea Rozario, SHIP’s director general, says: ‘There is more confidence coming back into the market.

The most popular type of equity release product is a lifetime mortgage. Interest is not levied monthly but rolls up and is added to the outstanding loan. This is repaid only after the homeowner dies or goes into care. Several lenders have reduced their interest rates this month. Aviva is down from 6.82 per cent to 6.72 per cent while LV= has cut the rate for borrowers aged between 60 and 80 from 6.69 per cent to 6.59 per cent.

You can read a full review of the latest developments at www.thisismoney.co.uk