Elderly homeowners worried about the cost of living crisis are unlocking a record £16.7million from their properties every day.

Borrowers used capital release loans to withdraw more than £1.5bn in the first three months of the year, up from £1.34bn in the previous quarter.

It’s also a staggering 380% increase on the £394m of home equity accessible in the first three months of 2016, according to figures from the Equity Release Council. Equity loans are available for owners aged 55 and over.

Borrowers do not have to make monthly payments. The loan is repaid in the event of death or moving into a long-term care facility after the sale of the property.

Between January and March, a record number of 23,395 owners took out this type of loan. And broker Age Partnership says the proportion of homeowners using the release of equity to wipe out lingering mortgage debt has increased “significantly” since the start of the pandemic.

Mortgage payments are the biggest monthly bill for most people, and rising interest rates mean rising costs.

Meanwhile, household budgets are already under pressure from soaring energy bills and food prices. And while inflation is 9.1%, state pensions have only increased by 3.1% this year.

That means many nearing retirement are desperate to get rid of their most expensive monthly expenses.

Between January and June 2022, 31% of borrowers wanted to pay off their mortgage, compared to 27% over the same period in 2021 and 25% in 2020, according to figures from Age Partnership.

Andrew Morris, senior equity release adviser at the broker, says: “Changes in working practices, layoffs and life choices have meant more people are choosing to retire early and want to switch to a mortgage. equity release where they have no monthly repayments.”

It comes as a study by LV= finds pensioners have seen their living costs rise by an average of £163 a month.

Debt for the over-55s is set to hit £400billion in ten years, according to a study by equity release lender more2life.

Borrowing by the over-55s is expected to reach £294bn this year, up from £272bn in 2021 and £209bn in 2017, a jump of two-fifths (41%) in five years.

Most of the debt is held by retirees between the ages of 55 and 64 who are typically still working while paying off mortgages and supporting their children.

Dave Harris, Managing Director of more2life, said: “While individuals need to consider how best to manage their finances as they age, it is essential that they consider all of their assets.

Living in a property you own but being too scared to turn on the heat and dread a trip to the supermarket makes no sense.

Separately, Canada Life reports that nearly 15% of borrowers who took out capital release with the company in the first three months of the year did so to help cover day-to-day costs.

Alice Watson, head of insurance marketing at Canada Life, said: “More people are leaving the workforce with lower pensions than previous generations and higher inflation is making it more difficult to manage. a fixed income.

“These changes mean more people are likely to look to their home wealth to help support their retirement aspirations, pay for home improvements or supplement their income.”

That’s tempting given that home prices have skyrocketed, rising 12.8% in the year to April. Still, experts urge caution. Equity release rates, which are fixed for life, are at their highest level in six years after climbing from an average of 4.1% at the start of the year to 5.63% today.

And because interest is usually accrued rather than paid off, debts can snowball.

One way to lessen the impact is to choose an equity release plan that allows you to pay interest and some or all of the principal.

Earlier this year, the Equity Release Council required all member lenders to offer this option to homeowners.

Equity Release came to the rescue when a freelance surveyor had to pay off his £300,000 mortgage. David Arnold, 64, had tried to refinance his interest-only home loan after a retirement investment he took out more than 30 years ago failed.

He had accumulated £110,000 in savings, but was short of the remaining £190,000 when his mortgage contract expired.

David’s bank declined his standard mortgage application because he did not meet the lender’s affordability criteria due to his age.

The solution came in having £800,000 of equity, which he had built up in his property.

David says: “It makes you look irresponsible when you can’t pay off your mortgage, but I’m far from it, the pension was mis-sold.”

Age Partnership found David an equity release plan to repay the £190,000 at a fixed rate of 3.01% for life with Aviva. He also has the option of repaying the capital later.

• Money Mail has produced a new guide on releasing equity and end-of-life mortgages. To request your free copy, call 0808 239 4005 or visit mailfinance.co.uk/release. Or fill out the coupon printed below.

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