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But as that equity decreases due to reductions in house prices, they risk rushing a decision that should not be taken lightly.

It is somewhat of a gamble. Should they take the money now? Or wait and see what happens to the value of their home in the future when it might increase again?

What is equity release?

Equity release does exactly what it says on the tin. It is a way of getting cash from the value of your home and is helpful for people in retirement who are finding money a bit tight living on their pension.

There are various different types, but broadly speaking it is split into two methods - home reversion or lifetime mortgages. (See FSA definition.)

Explained by the FSA, home reversion is when you sell all or part of your home to a third party in return for regular income and/or a cash lump sum and continue to live in your home for as long as you wish.

A lifetime mortgage on the other hand is when you take out a loan secured on your home, which is repaid by selling your home when you die or go into long-term care.

Whichever plan you choose, the biggest current concern is that equity release is still linked to the value of your property. And over the past year, house prices have been dropping month-on-month and have now reached an annual fall of 14.6 per cent since October last year.

This makes the average house price today stand at £158,872, as opposed to £186,044 a year ago, a significant drop in equity for a lot of people. And what is more, experts do not expect the market to get any better until at least 2010. (See related article).

Therefore, people considering equity release to fund their retirement are unsure what route to take, and how quickly.

Falling house prices

With property prices reducing as they are, people considering releasing equity from their homes might be compelled to hurry along the process before the value of the roof over their heads drops even further.

The logic of such a step is understandable, but is it sensible?

Falling house prices should not be a deciding factor, according to Dean Mirfin, business development director of intermediary Key Retirement Solutions.

If there is no real urgent need for cash and the client has not yet come to a firm decision, Mirfin claimed the consumer should not be pushed into it by the condition of the housing market.

It is important people remember equity release is not something to be entered into lightly, and whether property prices are falling or not, the appropriate consideration must be taken.

However, Duncan Young, managing director of Retirement Plus, argues that if clients want to free up some capital from their properties now is the perfect time to do it.

"People looking at using their homes to raise funds should act now or be prepared for the long haul. There is a tremendous amount of uncertainty at the moment so those people who are already thinking of raising cash from their property it is better to do it sooner rather then later."

Most equity release providers agree that the best time for people to do equity release should be linked to when the client needs the money and how much they are looking to raise.

Georgina Smith, sales and marketing director at Stonehaven, agrees with Young to some extent.

"For those clients who have a clear need for the money now and who are looking to raise the maximum amount of cash from their property, then they should act before property prices decline further.

"With increasing costs of living and many clients needing larger sums to consolidate debt, this is particularly relevant." (See related article.)

This is a point yet again reinforced by Young.

"Many people need the certainty of a set amount of money – to repay a debt for instance, and there is a danger when waiting, especially in a volatile housing market, that the amount required will not be forthcoming," he adds. (See related article).

A considered decision

Mirfin, of Key Retirement Solutions, claims that while Young has a point, it should only apply to those who have already decided equity release is what they want to do and not to those who have not yet made that decision.

All industry commentators agreed deciding on equity release should be a lengthy and in depth process.

Prudence is still key and Alison Beeston, compliance and communications manager of Bridgewater Equity Release, says no matter what, equity release should be considered long and hard.

She says: "As with any major financial decision those who are considering taking out an equity release plan should consider the full ramifications of what they are signing up to including their responsibilities and the potential consequences of such a decision."

Even clients who are currently experiencing various external pressures and perhaps are inclined to just get on with it should still take time out to have a serious think, says Beeston.

"Those customers should take as much time as they possibly can to weigh up all the options. The importance of receiving professional advice on equity release at this stage cannot be underestimated."(See related article).

She adds that equity release providers not shutting up shop, but in fact they are being particularly aggressive at the moment, so there is no real rush unless the consumer's finances dictated otherwise.

"I do not think we are currently in a buy now while stocks last market for equity release. Consumers should not be making a decision based on that type of attitude."

Benefits of certain products

Key Retirement Solution's Mirfin also hammers the point home. "There are clear advantages and disadvantages to the timing of this in the current climate, but ultimately no one should be doing it at a time when there is not a need to do so."

One of these advantages concerns people who are looking to release the maximum from their homes.

Mirfin claims: "Currently around 20 per cent of our look to release as much as possible. Naturally if property values are falling, so is the maximum available."

The different equity release products available to customers also come with their own individual advantages as the property prices slump.

For example, with regard to drawdown options most providers fix the facility as a percentage of the property value at the outset.

Mirfin says: "Should the value fall the facility remains at the agreed amount at inception. The customer is therefore able to release the funds they require now while securing the greater facility for the future, which will not then be affected by their property value."

Stonehaven's Smith says, likewise, there are people for whom the fall in house prices is less relevant and should have no bearing on their decision.

"There is a large amount of clients who are only looking to raise a small amount now but want the reassurance of a cash reserve facility in place should they need further funds in the future.

"For these clients, a decline in property prices is less relevant because their loan-to-values are so low."

Ultimately, what is clear is it is important people do not panic and rush into proceeding with equity release purely based on property prices.

At a time when there is speculation about the direction of house prices an adviser is the best person to work through the available options with the client to ensure they make the right decision for both themselves and their family in the long run.

*** Norwich Union is celebrating more then 10 years offering equity release, click here to find out more.