Retired home owners are borrowing a record £1.4 million a day against their properties as a savings crisis leaves many with too little to fund their retirement.
Tens of thousands have resorted to using their homes as “cash machines” experts said, as they struggle to fund retirement plans and pay care bills in old age.
Those in their sixties and seventies in particular have been turning to equity release, an expensive type of borrowing which typically lasts for life. Industry figures show the sum lent each day to the over-55s reached a record high between July and September this year, despite consumer bodies warning that equity release should be seen as a “last resort”.
More than £375 million was borrowed in the three-month period, according to the Equity Release Council, the industry trade body, equal to £4 million a day.
Nigel Waterson, a former Conservative MP and chairman of the organisation, said “These figures show equity release is proving invaluable for the over-55s approaching retirement as pension savings fail to cover rising costs.
“Rising house prices also mean that customers have a growing pool of equity at their disposal”.
Saving rates have plunged since the financial crisis, hitting large numbers of elderly people who relied on the interest to supplement their pensions.
Many savers have also found that money in pension funds has provided a much lower income than they had anticipated.
In the early Nineties, a man aged 65 could have turned £100,000 into a life-time income of more than £15,000 a year by buying an annuity.
Today, someone of that age would be offered nearer £6,000.
Ros Altmann, the Government’s older people’s tsar, said for many pensioners, George Osborne’s radical reforms next year allowing unlimited access to pensions will come too late, as they have already locked into an annuity. “Many people are realising that the only way they’ll get the retirement they want is find a way to unlock the capital in their homes, which is typically their largest asset,” she said.
Almost half of those borrowing against the equity from their homes were doing so to meet “everyday costs”, the Equity Release Council found, although most gave more than one reason.
Other causes included funding home improvements and holidays, with four in 10 citing one of these reasons as the motivation.
The research found 27 per cent of people wanted to give money to family members, particularly grandchildren who were struggling to get on to the property ladder themselves.
Other said they needed cash to pay off existing debts or clear a mortgage.
Ms Altmann said some pensioners were borrowing against their homes to pay for nursing care as they awaited the £72,000 cap on fees due next year.
“The situation will only get worse as more people need care in later life and are forced to spend hundreds of thousands of pounds before the Government steps in to cover the costs,” she added.
One in five over-55s who were considering equity release told lenders they needed the money to fund home improvements so they could receive care in their homes. The average amount borrowed between July and September was £67,467, the data showed, itself a record.