Slow down in take up of equity release mortgages

The rate at which retired homeowners are unlocking money tied up in their property slowed during the second quarter of the year, figures showed today.

During the three months to the end of June 5,588 equity release mortgages were taken out by the over-65s, worth a total of £252m, according to the Council of Mortgage Lenders (CML).

But the figure was lower than the 6,131 loans worth £281m that were taken out during the same period the previous year, and was well down on the £345m people unlocked from their homes during the final three months of 2004.

The CML attributed the slowdown to subdued house price growth, which it said had dampened both the willingness and ability of borrowers to unlock the equity in their property.

Equity release mortgages, also known as lifetime mortgages, enable retired homeowners to tap into money tied up in their homes without having to move house.

The loan is not repaid until the property is sold as a result of the owner dying or going into long-term care, and interest can either be paid on a monthly basis or added to the total amount owed and paid when the property is sold.

The mortgages, which were bought under the regulation of the Financial Services Authority last year, have been growing in popularity as people look to cash in on soaring house prices to supplement their pensions and fund home improvements and maintenance.

Despite the slow down in the rate at which retired homeowners are unlocking equity, the total number of outstanding loans still rose by 6% during the quarter to just under 94,000 worth £4.61bn.

"Today's figures demonstrate how lenders, intermediaries and consumers are taking a cautious and responsible approach to opening up the equity release market," said Jackie Bennett, CML senior policy adviser.

"Our results show that the equity release market is still growing, although at a slower rate than in previous years.

"The fact that there is still considerable unmortgaged equity in the over 65s' [property], and lifetime mortgages only represent half of 1% of outstanding mortgage balances, means that this is an area with considerable potential for growth."