The equity release industry continues to grow as we head into tricky post-Brexit waters
You may have seen greater press coverage dedicated to the growing trend for homeowners aged 55+ seeking financial freedom by releasing equity from their home. For many years discussing equity release has been a financial taboo, however, this topic is quickly gaining favour among those who once opposed its very existence.
Here – from an equity release specialist’s viewpoint – we seek to explain how equity release has steered itself along the road to success and why lifetime mortgages in 2016 are now experiencing a rise in popularity and providing a brighter future for retirees.
Needs, Demands and Wants
Pre and post-retirement needs are changing. We are seeing a greater demand for retirement lending among the mature generation, in particular taking their mortgage shortfalls towards retirement. This has brought a plethora of issues as traditional lenders are reigning in mortgage books, demanding repayment and tightening lending criteria.
‘Mortgage prisoners’ is the term commonly used for people that feel trapped in this situation.
“We are seeing a greater demand for retirement lending”
Further confusion has arisen over recent pension reforms, particularly following the demise of annuities, and mistrust over transferring pension benefits. This has led to greater responsibility falling on retirees’ shoulders, at a time when a lack of independent advice is clearly evident.
Post-Brexit, interest rates have fallen, which were already in a dire state for many savers. The resultant loss of investment income has seen shortfalls arise for those reliant on savings to supplement their standard of living.
How Equity Release Provides Solutions
Over recent years, lifetime mortgages have undergone a period of significant innovation which has seen them align themselves with the issues facing today’s retirees. Post-credit crunch, equity release lenders have increasingly been able to access new funding lines, bringing new flexibility in product design and increased choice for consumers:
1) Interest-Only Lifetime Mortgages – equity release plans now offer a monthly repayment route, facilitating the ability to remortgage away from residential lenders demanding repayment. Options now exist for homeowners to maintain interest-only payments for a lifetime without the need for income verification, or moving house.
2) Voluntary Repayments – for those concerned over their beneficiary’s inheritance, voluntary payment schemes provide the most flexible mortgage to-date. Offering homeowners the opportunity to make ad-hoc repayments of up to 10% of the original amount borrowed with no penalty, creates choice and control over their future mortgage balance.
3) Lowest Ever Interest Rates – increasing competition between lifetime mortgage providers such as Aviva, Legal & General & LV= has sparked an interest rate war. Healthy for consumers, this has seen fixed lifetime interest rates fall to their lowest rates ever, currently starting from 4.35% MER (4.50% typical APR).
4) Future Proof – with an array of optional extras you can tailor your lifetime mortgage around your circumstances now and for the future. Plans now come with five-year fixed early repayment charges, great for those who know they may move and downsize in the future and redeem their plan.
These are just some of the many innovations changing the equity release landscape, but at the same time providing a vehicle for retirees to enhance their retirement and live it to its fullest.
Equity Release Supermarket are one of the leading independent UK equity release specialists. For a free initial consultation please call Freephone 0800 678 5074 or visit our website at equityreleasesupermarket.com
These are lifetime mortgages and home reversion plans. To understand their features and risks, ask for a personalised illustration. There will be a fee for mortgage advice. This will depend on your circumstances, but we estimate that it will be £995.
*This article does not contain and should not be construed as containing investment advice or an investment recommendation or an offer of or solicitation for any transactions in financial instruments. Any opinions made may be personal to the author and may not reflect the opinions of Equity Release Supermarket or CALIBRE