HOMEOWNERS have released a staggering £5 billion of equity from their properties to fund their retirement, according to new figures, raising fresh fears about the size of Britain’s debt burden.

The value of outstanding equity-release mortgages, which allow you to borrow against your home to provide cash in retirement, crossed the £5 billion barrier for the first time in September, according to a survey by Key Retirement Solutions, a specialist adviser.

The value of equity release has gone up recently because fewer homeowners are taking on more debt, rather than because more people are signing up for the schemes, which will raise concerns among critics of equity release.

The average amount of equity released per home rose from £44,651 in June to £47,989 in September, while the number of mortgages fell from 6,316 to 6,106.

However, Dean Mirfin of Key Retirement Solutions said: “I would be more worried if we had seen this trend over a number of months, but the amount of equity released as a portion of property values has remained stable at about 25%.”

Nevertheless, Key Retirement says equity release should only ever be a last resort. Mirfin points out that two out of three people who approach him about equity-release mortgages do not take out a scheme once they have considered other options.

For example, you could downsize to a smaller property if you need capital, or you could take out a standard mortgage if you have enough income to support the repayments. Interest rates on standard loans are cheaper than on equity release.

However, if you are short of both income and capital and do not want to move home, a form of equity release may be your only option.

There are two types of equity-release plan — lifetime mortgages and home-reversion schemes.

With a home-reversion plan you sell a proportion of your home in return for a lump sum or regular income. You can remain in the property until you die or go into a nursing home. The reversion company will take its share of the profit when the house is sold.

Lifetime mortgages allow you to take out a loan against your property, typically up to 50% of its value, to release capital. Interest is charged on the debt but, unlike standard mortgages, there are no monthly payments. Instead, the interest rolls up and the total sum is repaid when the house is sold.

Rates on lifetime mortgages, which are usually fixed for the term, have come down recently and you can now get less than 6%, but this is still more than on many standard loans and your debt will mount up quickly.

If you took out a £50,000 lifetime mortgage from Bristol & West at 5.95% your debt would be worth £66,754 after five years, £89,121 after ten and £118,983 after fifteen years.

If house-price growth is subdued, your debt could quickly eat into the remaining equity in your home, leaving you with less to pass to your heirs when you die. You should therefore discuss equity release with your family. And go for a provider with a negative-equity guarantee — a promise that your debt will never be bigger than the value of your home.

Lifetime mortgages are also becoming more flexible. Prudential and Just Retirement have schemes that do not require you to take your entire capital all in one go. You can draw smaller sums when you need them, so your debt does not mount up too quickly.