The toll of the credit crunch: fewer retired people releasing equity from their homes » Housing » 24dash.com

The number of retired people unlocking money from their home has dropped by 16% as falling house prices and the credit crunch take their toll on the sector, figures showed today.

Around 18,910 equity release plans were taken out during the nine months to the end of September, 16% fewer than during the same period of 2007, according to equity release advisor Key Retirement Solutions.

But the group said the rate of decline had slowed during the third quarter, with figures for the three months to the end of September only 10% lower than for the corresponding period of the previous year.

Retired people unlocked a total of £340 million from their homes during the third quarter, 7.5% less than in the third quarter of 2007.

But despite the fall in the number of plans taken out and their total value, those who continued to unlock equity withdrew 5% more on average at £52,298 than a year earlier.

Dean Mirfin, business development director at Key Retirement Solutions, said: "Naturally 2008 is proving to be a challenge for all sectors of the financial services industry."

Equity release enables retired homeowners to unlock money from their property without having to sell their home or move.

They can do this either by taking out a lifetime mortgage which is not repaid until they die or sell their home, or by selling a proportion of their property to a home reversion company.

Draw down plans, which enable people to borrow money as and when they need it, rather than having to take it all in one go, remained the most popular type of equity release plan, accounting for 62% of the market.

But home reversion plans continued to fall in popularity and now account for only 4% of all plans taken out, down from 7% in the third quarter of 2007.

Nine of the UK's 12 regions saw a fall in the number of people taking out equity release plans, with Yorkshire and Humberside seeing the biggest drop of 33%, although this followed strong growth during previous quarters.

The main reason people gave for unlocking equity continued to be to carry out improvements to their home or garden, cited by 59% of people, followed by holidays and debt repayments.

Around 22% of people also said they were taking out one of the plans in order to help out family or friends.