Thousands of homeowners in their 50s used high-interest equity release loans last year to unlock cash from their properties. But experts have warned that interest payments could erode the total value of the properties leaving retirees unable to downsize and with no inheritance to pass onto children. The products are growing in popularity, but financial experts are concerned that people are accessing equity release too early and some are calling for the minimum age to be increased to 60 or higher.
Although borrowers are given a table to show the exact amounts involved, many will not attach importance to this. It is only when they have died, and the family come along to find the inheritance is much reduced, that complaints will occur. Advisers encourage family members and potential beneficiaries to be involved from the outset to avoid this time-bomb. With longer life expectancies, the time available for debts to increase is longer than it used to be so debts will be higher.