Aggregrating the Best Equity Release News…

It is one of SHIP’s most popular and recognised equity release guarantees. But what does it mean to the customer?

The no negative equity guarantee is a set-in-stone rule of SHIP governed equity release plans. It means that you will never owe more than the value of your home - no matter what.

Historically, house prices have always risen over long periods of time. Logically, this makes sense too as the population grows over time, thus increasing demand.

However, what should happen if property prices fall over the long term? The fixed interest rate will guarantee that your initial loan will grow exactly in the manner illustrated when you took out the plan. If property prices were to unexpectedly fall, then there may be a time in the future when the loan amount is higher than the price of the property. Fortunately, with a no-negative equity guarantee, the maximum repayable amount will never exceed the price of your property - even if the difference is very sizeable.

This can give you and your loved ones peace of mind that there is no debt left to your estate as a result of you taking out an equity release plan.

Use our equity release calculator to compare rough estimates of the amounts offered by the major equity release providers. Or for a more detailed and personalised comparison, call 0800 012 4180 for a free, no-obligation chat about equity release.

Many experts predict that the demographic make-up of the UK is changing quite considerably. The UK’s population is enjoying a greater life expectancy than ever before. Many different figures have been quoted but the average estimate is that the number of over-65s will increase to represent 21% of the population, some 15.1million by 2029.

For the equity release market, this has obvious ramifications. But what about the indirect ramifications?

The sharp and sudden decrease in trend for final salary pensions, along with the Bank of England’s fear that the recession will last longer than first thought, the reliability of pension funds and other investment vehicles will come into question.

The trend for equity release has been steadily upwards, regulations have become more stringent and SHIP now accounts for around 90% of equity release providers. As mentioned in this news blog before, certain members of the House of Lords are calling for equity release to be government backed as a serious retirement-finance option. This all points to equity release possibly being accepted as the answer to the problems caused by the recession. There are risks involved with equity release, as there are with other retirement plans and investments. It is about the individual getting unbiased, professional advice and then weighing up their options taking all possibilities into the balance.

Recently, with the lending criteria being constricted by most high street banks, many first time buyers find themselves in a position where the deposit required to take out a mortgage is simply out of reach. It looks as though more and more homeowners are helping to share this challenge with their children using equity release as a tool to come up with the hefty deposits.

This may be seen as a welcome hand in a difficult time and goes to show that the recession cannot stifle innovation and determination. Equity release may affect the inheritance one is able to leave but many may agree that causes like this, among the countless other reasons, are well worth it.

One of the most talked about and potentially viable alternatives to equity release is to take a bold step and downsize to a smaller property. The Office of Fair Trading recently covered downsizing as an alternative to a selling a house and renting it back. The OFT stated that:

‘Relocation may also be costly and sale on the open market may take a considerable period of time, particularly in the current climate.’

For some, house prices are back on the rise and certain kinds of house are particularly rising but this is not to say it will make the sale any quicker or the move any easier.

If you feel particularly vulnerable to the current market situation then releasing equity may well be a viable alternative to moving house for some.

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 perhaps considered a viable 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 from an FSA authorised IFA 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 might be an alternative 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.

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.