As the number of equity loans increase as a desperate way of raising cash as the recession continues, observers are urging those considering such a step to proceed with caution.

A number of consumer groups have warned that taking out equity release mortgages in a falling market can be a recipe for disaster. House prices have already dropped 25% and experts are undecided as to whether the falls will continue, or bottom out.

Equity release mortgages are up nearly 20% and they are popular with mature homeowners who have been trying to get by on depleted savings and pensions.

The equity release market is worth some £1.2 billion a year. Some mortgage advisors stand accused of talking potential clients into taking out bigger loans than they actually need, in order to boost the levels of commissions. And the Financial Services Authority found that in 2005, advisers were not properly warning potential clients about some of the pitfalls, including higher tax rates and the disqualification from certain benefit schemes.

The average amount being released by homeowners is around £50,000 and with falling property prices, there would be less equity around to utilise.

But equity release mortgage advisors have hit back saying that after 15 years of major increases in equity in houses, there is still plenty of flexibility for most householders. They maintain that it remains one of the best ways of utilising money that otherwise cannot be touched.

But consumer groups have warned people contemplating such a move, that they should consider a whole array of products that might be better suited to raising money via bricks and mortar.

Guest Article by Neil Camp