Equity Release is increasingly being used to repay debt according to Key Retirement Solutions

According to the Key Retirement Solutions 2009 Equity Release Market Monitor the amount of home owners using equity release to pay debts has increased to 35% in 2009, from 11% in 2008.

The most popular use of equity release remains for home improvements, although this has slipped to 56% in 2009 from 60% in 2008.

Equity release lending was down 17% in 2009 compared to 2008 with 21,305 new cases and lending of £1.02bn, down 14% from the 1.19bn lent in 2008. The change was put down to a drop in property values and an increased take up of drawdown plans, which allow clients to draw down smaller amounts of money as and when the need it.

Dean Mirfin, group director at KRS, said: “The uses of equity release continue to be widespread; however the considerable increase in the use of funds to repay debt is one of the greatest trend changes we have seen. The trend of debt repayment mirrors the trend across all ages in the UK of clearing debt and freeing up more disposable income and no doubt we will see this continue further still in 2010.”

Drawdown plans dominated 2009 increasing from 60% in 2008 to 64% in 2009, while lifetime mortgages slipped from 36% to 33% over the same period and home reversions falling from 4% to 3%.

Mirfin added that as property value bounce back, releasing the wealth tied up in homes to improve standards of living will become a more attractive proposition.