Older people turning to equity release so they can enjoy their retirement

Older people are increasingly turning to equity release to pay off debts, boost their spending and enjoy their retirement more.

According to Key Retirement Solutions, a specialist advisor for people over-55, almost 20,000 people released money locked up in their properties during 2012.

And a further £508 worth of equity release loans were taken out in the first six months of this year.

Dean Mirfin, director of Key Retirement Solutions, says equity release is an attractive option to retirees at present because many are struggling with low annuity and savings rates at a time of high inflation.

"When other sources of retirement income are under pressure, with the Bank of England ruling out any base rate rise until 2016 at the earliest, it is encouraging that pensioner homeowners are literally sitting on a major asset," he told the Daily Express.

Equity release works by allowing people to borrow money against the value of their home while remaining in residence. There are no monthly repayments to be made, but interest is rolled up and paid off as a lump sum after the person dies or goes into care.

Money left over from the sale of the property is distributed to family and friends as per a person's will or through the laws of intestacy if no will is in place.

According to Mr Mirfin, people over the age of 65 are currently sitting on around £774 billion of property wealth.

Nigel Waterson, chairman of the Equity Release Council, said equity release is becoming more mainstream with providers offering a greater range of products.

He added: "With more people drawing on their largest financial asset, the home, to improve their spending power, we see providers responding with increasingly flexible products that allow you to pay off interest as you go or even to ring-fence an inheritance for your children."

A recent study conducted by Barings Asset Management found that almost 20 per cent of people aged 65 are still working and have no idea when they'll be able to retire.

Find the nearest Barchester nursing home.