Mortgage: Equity release rates drop as demand rises – ‘no signs of easing’ as the UK ages

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Mortgage holders who are at least 55 years of age have option of utilising a range of financial products which will let them release the equity (cash) tied up in their home. This money can be received a lump sum or in separate payments.

Equity releases can be expensive however and there can also be other long-term negative repercussions.

As such, it may not be the best option for some mortgage holders but new research reveals that may not be factored in over the coming months as continues rage on.

Recently, OneFamily surveyed 2,000 over-55s and their findings revealed that equity release figures could rise soon as elderly family members seek to help out the younger generations.

It was revealed that 20 percent of those considering equity release say that the pandemic’s impact on their broader family’s finances has meant that they’re more likely to take out the product.

This trend follows existing actions, as 15 percent of over-55s who have have already used equity release did so in part to help family members.

Tellingly, 42 percent of the respondents expressed that they would rather pass money onto their family as a living inheritance to help them out, with 14 percent thinking that equity release is an appropriate option for this.

Those who are considering equity release are often advised to seek financial guidance and this is especially prudent given that 20 percent of respondents feel that they can’t discuss finances with their family.

Matthew Ellis, OneFamily’s Head of Direct Advice, commented on the findings: “The last six months have turned life upside down but, with the situation continuing and ever-increasing house prices, it doesn’t look like things are going to improve in the short term.

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“Equity release isn’t right for everyone and getting financial advice is absolutely crucial in finding the right product.

“Interest rates are low and it’s often possible to pay off the interest every month to prevent the debt from increasing – which is a common worry.

“Freeing up wealth in property can also help to find that deposit for a child’s first home to give them the financial support they need right at the time that they need it.”

Unfortunately, additional research from the Equity Release Council revealed that those looking for decent deals in this area may struggle.

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According to their Autumn 2020 Market Report, average rates for equity release products reached lows of 4.11 percent in July 2020, with over half of products offering a rate of four percent or lower, and a fifth offering rates below three percent.

On top of this, there has been a five percent reduction in product numbers from 401 and 379 between January and July 2020.

Coronavirus has undoubtedly had an impact on the market but David Burrowes, the Chairman of the Equity Release Council, expressed optimism for the future: “The unprecedented uncertainty of the first six months of 2020 has affected households and businesses alike, with the equity release market no exception.

“While pent-up demand in Q1 led to a strong first quarter, the impact of Covid-19 and the lockdown dominated Q2 before showing initial signs of recovery in June.

“Despite this uncertainty, the market has shown resilience and consumers considering equity release continue to find a wide range of product options on the market, while the average rate has fallen considerably over the last eighteen months.

“As the UK’s ageing population seeks to fund increasingly longer retirements, property wealth can play a fundamental role for many people, both now and in the future, as part of a more joined-up approach to planning for retirement.

“The challenges that lie ahead show no signs of easing, so it is important that people are aware of all the options available to them to help fund later life.”

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