RegulationMay 29 2013

Equity release will help pay off interest-only

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BySimoney Girard

According to Georgina Smith, managing director of the equity release provider, older homeowners with interest-only mortgages, who have an underperforming endowment or who do not have sufficient savings, “face a worrying future”.

The data shows that in 2012, 45.1 per cent of customers in London cited paying off their mortgages as the primary reason for taking out an equity release loan compared to only 27.6 per cent in 2008.

In the South-East 43.5 per cent of customers in the region were using equity release to pay off mortgage debt compared to just 30 per cent in 2008. The increase in homeowners in London and the South East using equity release to settle their mortgage debt reflects a growing national trend, with on average four in 10 equity release mortgages being used for this reason.

She said: “Equity release products have come a long way over recent years and there are increasingly flexible solutions that meet changing financial requirements.”

This follows the release of the statistics follows the publication of the FCA’s thematic review into interest-only mortgages, which aimed to take action over concerns about widepread loan shortfalls. It revealed there were 2.6m interest-only mortgages due for repayment by 2041. As many as 48 per cent of those face a potential shortfall at repayment day of £71,000.