(Bloomberg) -- They have been attacked by critics for taking advantage of elderly Britons. But financial products that allow over 55s to borrow against the equity in their home are providing a 7 billion-pound ($10 billion) boost for the U.K. economy, according to Legal & General Group Plc.
In a report Thursday, it estimated that 2.34 pounds is generated for every pound borrowed, with so-called equity release advances growing 42 percent last year to over 3 billion pounds.
The loans allow older people to get their hands of tax-free cash sums without having to make monthly repayments. Instead, the advance, and the interest accrued, is paid off when the homeowner dies and the property is sold.
The products are provided by insurers such as Legal & General and the money can be used for everything from home improvements and vacations to helping children onto the housing ladder and paying off existing debts.
But there has been criticism over the cost of such loans. According to Responsible Equity Release, an independent advice service, fixed interest rates range from 3.8 percent to 6 percent. Conventional mortgages charge around 2 percent on average, Bank of England figures show.
To contact the reporter on this story: Andrew Atkinson in London at a.atkinson@bloomberg.net.
To contact the editors responsible for this story: Fergal O'Brien at fobrien@bloomberg.net, Lucy Meakin, Brian Swint
©2018 Bloomberg L.P.
Essential Business Intelligence, Sharp Market Insights, Practical Personal Finance Advice, Daily Fuel, Gold and Silver Prices and Latest Stories — On NDTV Profit.
