The equity release market is booming, with British homeowners, who have withdrawn £18 billion of housing wealth in the past 25 years, looking ever-more keen to use the value built up in their homes to help fund their retirements.

In the first half of 2016 alone £934 million was borrowed via equity release, according to research from Key Retirement, with 715 homeowners in Scotland withdrawing a total of £38.9m.

Despite the figures, which are expected to rise this year, Key Retirement technical director Dean Mirfin noted that equity release plans, which are aimed specifically at the over 55s, will not be suitable for everyone and should never be used as an alternative to spending saved-up cash.

“We have 130 people advising on this and an integral part of their training is to ensure customers can talk about their motivation for doing it,” he said.

“What impact will releasing this money have? What will it achieve? Is there real value in doing this? Because it comes at a price.

“If, when talking to clients, we can’t get to the nub of what that embedded value is - it could be to repay a mortgage, upgrade their home, help their family - we’d tell them not to do it.”

Currently there are around 80 equity release products on the market. Most are lifetime mortgages, meaning the money is forwarded as a loan and as such carries an interest rate, although it is also possible for homeowners to sell all or part of their home to a provider while retaining the right to live in it.

With a lifetime mortgage the sum borrowed gets paid back either when the person dies or goes into long-term care, with the sum owed increasing over time for those choosing not to make monthly interest payments.

The average interest rate on lifetime mortgages currently stands at 5.21 per cent, with lenders typically lending a 60 year old 30 per cent of their property value and a 70 year old 37 to 38 per cent.

One of the lowest rates currently being offered is from Legal & General, which charges a fixed rate of 3.7 per cent on loans of between £10,000 and £4m to people aged 60 or over.

At the higher end of the spectrum, Just Retirement charges 5.7 per cent and will make a minimum loan of £10,000 and maximum of £600,000.

Rachel Springall, finance expert at financial website Moneyfacts, said that aside from interest rates anyone looking to take out a lifetime mortgage should factor in other costs such as solicitors’ fees and product charges before taking on a debt that will ultimately increase over the rest of their life.

“The interest on lifetime mortgages is rolled up or compounded over the duration of the loan, which means the debt will increase the longer the debt is maintained,” she said.

“Property prices can fall as well as rise, so borrowers need to feel confident they can pay the loan back at the end of their lifetime or by selling their home.”

Mr Mirfin at Key Retirement noted that for those choosing not to pay off their interest every month, typically the amount owed on a lifetime mortgage doubles every 15 years.

While this means that the person taking on the debt would have to live well into their hundreds to lose their home entirely, they need to be aware that they won’t be able to leave their home in its entirety as an inheritance.

“The positive is that you can never owe more than what the house is worth,” he said.

“If the worst happens and property prices fall and the loan is still accruing, if the loan is worth more than the house then it’s written off.

“The only money that can be touched is the sales price of the property, even if the estate has more money.”

Although some people may baulk at the thought of eating into their children’s inheritance now, Mr Mirfin said that one of the main reasons people cite for taking out a lifetime mortgage is to give cash to children or grandchildren to help them get on the housing ladder.

Other reasons are to pay for holidays to see families abroad or to upgrade homes and gardens to make them easier to manage in older age.

While the products will not be for everyone, Ms Springall at Moneyfacts said they can be a good option “for those looking to unlock cash from their homes who struggle to obtain finance elsewhere”.

Nigel Waterson, chairman of the Equity Release Council, agreed: “Equity release allows people over the age of 55 to withdraw some of the value in their home while remaining in it, without having to sell up and downsize.

“This can be an invaluable option for older people, especially those who are asset-rich but cash-poor.”

For those who do feel that using some of their home’s value now rather than preserving it all to pass on at death, Mr Mirfin noted that the current low-interest rate environment is making equity release products far more attractive than they were even a year ago.

“At the moment it’s a fabulous deal because interest rates are so low,” he said.

“If you took one out a year ago and borrowed the average, which is £76,300, the cost of borrowing today compared with a year ago is £28,000 cheaper over 15 years - over 20 years it’s nearly £50,000 cheaper.”