AS the storm clouds gather over Europe’s economy, many of Britain’s over-50s must believe that the value of their homes will support their living standards through any financial turmoil which lies ahead.

According to the latest State of Retirement Report from insurer LV, nearly one in three of Britain’s over-50s (6.25 million adults) has no retirement savings in place and expects to rely entirely on the basic state pension when they stop work.

It is thought that 1.2 million retired people live on just the state pension, equating to £5,587 a year, which may be boosted to £9,672 a year if they qualify for additional benefits.

Even at that level, retired people have far less than a worker on the UK minimum wage, presently £11,477 per year.

LV fears the situation will worsen soon. A total of 15 per cent of those already retired or due to retire in the next five years have cut contributions to their long-term savings pot in the past five years.

Savers paying into private sector pension plans have cut back on monthly contributions by an average of £523 in the past 12 months.

Probably many over-50s, with at least one house price boom under their belts, see the value of their bricks and mortar as a lifeline in old age.

This is why equity release schemes – loans raised against the value of a property and usually repaid after the owner has died – increasingly appeal to a generation which might have lived slightly beyond its means.

The latest Equity Release Market Monitor for the first quarter of this year from Key Retirement Solutions, a specialist financial advisor, estimates that lending against the value of homes rose to £217.1m, against £213.5m for the same period last year.

The greatest increase in the number of plans sold was in the North of England – up 65 per cent since last year.

But the greatest increase in the amount of money drawn was in London – up 45.7 per cent, followed by the East Midlands (43.7 per cent) and North of England (15.1 per cent).

Money drawn by homeowners in Northern Ireland crashed 47 per cent, reflecting the plunge in property values across the Irish Sea.

Ship (Safe Home Income Plans), the trade body for equity release providers, says the proportion of customers choosing to access their equity in smaller tranches is rising rapidly.

Drawdown mortgages, where borrowers take an initial sum – usually £10,000 – and further advances when required, accounted for 67 per cent of the market in the first quarter of this year, followed by lump sum mortgages (32 per cent) and home reversions (two per cent).

About 90 per cent of equity release loans, worth £179.5m in the first quarter of this year, were arranged through financial advisors, with the rest (worth £19.6m) sold direct to the consumer.

Ship thinks the popularity of drawdown mortgages over the last quarter is probably the result of more people using equity release to boost monthly income, rather than pay for one-off expenditure.

How much each applicant can borrow through equity release depends on their age and the value of a property: at 65, the limit is 30 per cent; at 75, this rises to 40 per cent; and at 85, the general limit is 50 per cent.

Vanessa Owen, head of equity release plans at LV, says: “We’ve seen a big change in the reason why people take money out of their homes.

“In 2008, it was lifestyle changes. People wanted to enjoy some luxury living, or great holidays.

“Today, more and more people want the money to pay off debts. More and more people in retirement see credit card debts piling up, and equity release is an obvious way to consolidate these debts.”

Ms Owen says the LV equity release product works well because it guarantees a limit of the money available on a property for 15 years. There is no early repayment charge after ten years, and the cost of repaying any money drawn is low.

• Contact Age UK on 0800-169- 6565 and at ageuk.org.uk for more information.