Thank you to Rowan Frayling for writing this month’s blog for us
A recent short and snappy headline from the Equity Release Council (ERC) quite succinctly summarises the size of the market and its growth in the last few years… probably because the ERC pay someone to write their publications as opposed to me turning my hand from giving advice to writing blogs for the afternoon!
So, what was their statement?
“Equity release lending more than doubles in two years to reach £870m in Q1 2018”
The article goes on to state that nearly £10 million of housing wealth was withdrawn every day, compared to only £4.3 million in 2016, so I feel it’s fair to say that this sector is definitely growing, and at some pace, but what are people drawing the money for?!
The Top 5 reasons for Equity Release, according to a recent survey by The Telegraph are:
To clear an existing mortgage
Property prices have certainly risen in the last 20 years, however mortgages used to purchase these properties may have been arranged on an interest only basis with endowments that have since failed to perform and consequently homeowners are left with insufficient funds to repay the money back at the end of the mortgage term. Equity Release can be used to repay the mortgage loan on a lifetime mortgage basis.
To make home/garden improvements
A home may be in need of some repair work or, instead of moving to a more suitable home for their changing needs, some older borrowers are choosing to unlock the equity in their home to improve their home, whether that is for aesthetic purposes or practical and necessary needs such as making adaptions to the home or the garden they enjoy spending time in.
Maybe retirement income is lacking because of a small or perhaps even non-existent workplace pension; or perhaps the recent pension freedom changes have meant the funds were spent elsewhere as opposed to providing an income in later life. Equity Release can offer a lump sum or a top-up to retirement income to ensure the borrower can enjoy a comfortable lifestyle.
For gifting to family or inheritance tax planning
Rather than passing on one’s wealth on death, some would-be borrowers are choosing to release this wealth earlier to allow children or grandchildren to purchase homes, pay for school fees or pay off student debt to name a few examples. Some gifts may qualify for inheritance tax exemptions and if the money is borrowed specifically as a way of mitigating the impact of potential inheritance tax, may reduce one’s liability.
Funding holidays or large purchases
Often known as aspirational purchases, this may not be so much of a necessity unlike paying for home care, or making urgent repairs to the home, but nonetheless some older borrowers are choosing to release equity to allow them to enjoy their retirement, having worked hard for many decades.
Find out if equity release is right for you – with a wide range of schemes available, and a potential impact on benefits, tax and more, it is important to seek advice if Equity Release is an area of interest to you.
As a qualified Equity Release advisor, I am more than happy to discuss your options and advise you on the best course of action.
Rowan Frayling CeMAP CeRERW
Email email@example.com Tel (01635) 905402 Mob (07823) 346000