The majority of consumers aged 55+ is confused about equity release, with a mere 11 per cent claiming they fully understand the product, a report has found.
Research conducted by SunLife found 55 per cent of homeowners did not know an equity release lump sum was tax free, a figure which rose to 64 per cent in the 55-65 age bracket.
About 65 per cent were also unaware getting equity release was possible with a mortgage.
The report, which interviewed 1,007 homeowners aged 55 and over, found three in ten would consider equity release but 52 per cent believed moving home was not permitted under such a plan.
Simon Stanney, equity release service director at SunLife, said the company found one in five over 55 year olds felt worse off financially than they had expected to at their age, but many had money tied up in their homes.
He said: "This is a generation that are generally property rich and cash poor due to healthy increase in the value of their homes, but inflation eating away at pension pots and increased living costs.
"But 62 per cent of those surveyed said they categorically did not want to downsize, which means the solution for the majority could be to unlock some of the value in their homes via equity release."
SunLife found homeowners aged 55 believed their houses to be worth £290,650 on average - an increase in value of £239,026 from the average house price of £51,633 20 years ago.
Dale Jannels, managing director at All Types of Mortgages, said customer education will play a big part in the financial wellbeing of the over 55s market which is set to explode over the next few years.
He said: "Many over 55’s have no idea what options are available, or where to find them and sadly might panic and sell the family home.
"As an industry we need to have the ability to inform clients of their options when their current mortgages comes to the end of its term, not just with equity release, but also with the new breed of lending in to later life loans.
"Clients will always have a number of choices available to them and these should be easily accessible."
Equity release has grown steadily over the past years. Figures released by the Equity Release Council last week (20 July) found homeowners aged 55+ unlocked £971m from their homes in the second quarter of this year - a record amount for any quarter.
Total lending between April and June had increased 12 per cent quarter-on-quarter and 39 per cent year-on-year.
More providers are also entering the later life lending market, such as challenger bank Aldermore, which launched its product in May.
Later life lending - not to be mistaken for equity release or lifetime mortgages - are mortgages that carry extended maximum age terms, allowing people of older ages to borrow money against their existing house or for a new house purchase.
rachel.addison@ft.com
