Equity Release Blog

Baroness Hollis of Heigham recently held a discussion with the House of Lords regarding equity release. Upon reading the transcripts, I got the feeling that Baroness Hollis was pro-equity release and her Lordship was eager to get to the truth about lifetime mortgages and home reversion plans. The crux of the issue was Baroness Hollis’ viewpoint that equity release should be a viable option for those who need long term care but want to stay in their homes with the neighbours that they have come to know.

I quote Baroness Hollis:

“Does he (the FS Secretary to the Treasury) agree that well regulated equity release can help to fund the adaptions and social care that will give an older person the choice of staying in their own home, rather than going into residential care.”

Baroness Hollis hits the nail on the head with her attitude and her call for the government to put to bed safety fears about equity release will be most appreciated. Equity release can provide the money to adapt houses so that moving into care may not be the only option available. The availability of equity release gives homeowners the choice to plan their future.

Now one of the key points that come up in any discussion about equity release is definitely the issue of how equity release affects inheritance. Understandably, applicants are concerned about leaving their families in the best possible situation. Given the current and unpredicted economic situation, however, some discussion has turned to how equity release can help one’s family in the here and now; when it is perhaps needed most. Up there with typical reasons to release equity such as world travel, replacement cars and visiting family; home extensions are a major reason to release equity as some families prepare to reunite under one roof in a bid to see them through the recession. This harks of good old British camaraderie in the face of adversity, which this particular writer enjoys hearing about.

Without further consultation and discussion about the different types of equity release schemes and home reversion plans along with your needs, requirements and plans for the future, it is difficult to deem whether equity release is suitable for someone. However, it is a bit easier to deem whether you aren’t suitable for one of the plans. The most important rule of thumb when deeming suitability is whether or not the applicant is both willing and able to move to a smaller and less expensive house. Sentiment plays a big role in this and often applicant’s want to remain in the house they know and love. However, if they feel that moving house is no big deal then this is usually the best way to release equity.

Unlike other mortgages, the equity release market looks set to grow during the coming periods in the recession. The performance of the stock market and the FTSE 100 affects some of those of a pension age quite dramatically. With billions wiped off the market during the recent turmoil, the shareholders are left short changed from their investments. Some of the major shareholders are in fact pension funds and other types of mutual funds which some people rely upon for annual dividends and returns. Without these, some may be looking to secure alternative funding for their retirement. Equity release can be one of those alternatives and the market is expected to grow as the economic recession continues.

This is one of the more popular questions posed to equity release advisers across the country. Unfortunately, it can also be one of the trickiest to answers and especially without a further, in-depth conversation and consultation with you personally. How much equity you could release from your property may depend on a number of different factors that may need to be explored in-depth before a reasonable estimate could be given. These factors may include the type of equity release schemes or home reversion plans that you go for, the amount that you would like to release, your age, your property value and the amount of secured loan on your property. Remember, these are just some of the factors involved and there may potentially be many more parts to the equation.

For most looking to take out equity release of some kind, it will be a big decision that involves some long-term planning and aforethought. With most decisions of this nature, some form of advice usually takes place. Equity release is usually no different. There are a range of options for those looking to seek advice on whether or not they should take out equity release and if so, how they might go about it. Equity release can be a very useful tool for retirement planning yet it is not always for everyone. An advisor might be able to distinguish between those who are suitable and those who aren’t.

Now there is an old saying around that says “There are only two certainties in life; death and taxes.’ Now as true as this saying is for most of the things in life, it doesn’t apply to equity release because usually, the money that you release from your property is totally tax-free. No windfall tax, no income tax or any other kind of tax for that matter. The reason being is that it is already your money. You have paid tax on it before and so will not have to pay tax on it again.

If you turn on the news for more than a minute you will no doubt hear talk about the economy shrinking, quarter by quarter. The collective output of the UK is getting smaller by the month and doom and gloom is predicted. One industry that does seem to be recession proof, however, is the equity release industry. As regular mortgages dry up to all but those with enormous deposits; equity release is growing at a very steady rate. More and more people are turning to their home as a viable means of retirement planning. One logical reason for this would be the instability of the financial markets and the low interest rates. This combination leaves little room to make your savings go to work. One way people are guaranteeing a steady source of income is to tap into their biggest asset, their home. In this market, it looks the ever more sensible option.

If you have been reading a lot about equity release, you will have come across the organisation called SHIP - Safe Home Income Plans. If so, you might be wondering what exactly it is that they do. Well I’ll try and explain a little bit more about SHIP for you. SHIP is a company that is supported by the most respected and responsible equity release companies. It has the aim of providing the consumer with the most reliable equity release scheme possible and does this by providing a code of conduct for its members to follow.

The code of conduct for equity release can be broken into two parts:

First, it is the duty of all members to provide clear and accurate advice on equity release.

Secondly, SHIP address the equity release and home reversion plans itself. All plans provided by SHIP members must carry a no negative equity guarantee; meaning you will never owe more than the value of your home - no matter what the market does.

Now the biggest news in the financial services authority at the moment is the monumentous decrease of the Bank of England base interest rate. It now stands at 1.5% and this is incredible as it is the lowest it has ever been. This is great news for those who are net debtors and those who have tracker mortgages as they have to pay back less each month. But what about those whose net personal balance sheet shows a positive sum? Well, this has serious repercussions as it all but eradicates the banks as a viable savings option; forcing risk-averse savers to incur more risk than they would like should they want to put their money to work.

As regards equity release, the Press Association expect the equity release providers to rethink their interest rates accordingly. Combine this factor with the pension fund instability and it is easy to see why equity release remains a growth sector in retirement planning.