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News from Retirement Experience


Equity release - more meat for the sandwich generation?

Demand for equity release products is continuing to grow – this is one thing which advisers involved in the market are very much agreed on.

Something else they tend to agree on is the fact that there’s no such thing as the ‘typical’ equity release customer. There are so many different motivations behind the desire to release capital from the value of a home. But we can easily identify clients whose lifestage and circumstances suggest they’re particularly likely to benefit from this type of product.

The‘sandwich generation’ is faced with a set of pressures and aspirations that combine the demands placed on people within other age groups and lifestages. Often not too far away from retirement themselves – with everything that entails – they also take responsibility for the needs of the generations both above and below their own.

Maybe there’s an aged parent whose long-term care needs to be funded... a son or daughter struggling to get a foothold on the property ladder... or grandchildren whom they understandably want to spoil a little...

Faced with a juggling act such as this, the sandwich generation has more than enough on its plate.

Source : www.ftadviser.com


Your home may be repossessed if you do not keep up repayments on your mortgage.


Where does equity release fit into the retirement picture?

The equity release market needs to provide more options if it is to expand and cater for an aging population, particularly now that new pension rules are in place. A managing partner of Later Life Academy, explains

It’s not unimaginable to think that the whole product space around lending to the retired is at a crossroads. Undoubtedly, a varied array of market movements have resulted in much greater focus being placed on the ability of older borrowers to secure mortgage finance.

The perception around how they might afford that finance in retirement, coupled with key issues such as longevity of life, the ability of the State to fund its growing pension responsibilities, how long-term care is going to be paid for - not forgetting such basics as quality of living.

All these social, economic and demographic changes are coming to a head now and the direction of travel still remains to a large extent unknown as we, the industry, look at what could happen next and how we respond to it.

Playing a growing role within this over-riding debate is the equity release market and how it fits into the market space. Is it likely to be a much more utilised product in the future or will it continue to deliver the kind of numbers it has done over the past half-decade?

One thing appears to be certain, that without a growing provider influx it’s likely that the market will only grow nominally, especially if we are not able to attract larger, more mainstream, well-known brands into the marketplace. There may even need to be far closer links forged between the specialist equity release players and those mainstream lenders who are looking at their existing borrower base – particularly those coming to the end of their interest-only terms – and wondering what to do next with them.

Read more at the Mortgage Finance Gazette


Your home may be repossessed if you do not keep up repayments on your mortgage.


Equity Release Council urges FCA to consider changes to mortgage affordability rules

The Equity Release Council (The Council) has asked the Financial Conduct Authority (FCA) to consider whether a relaxation of mortgage affordability rules could help more lifetime mortgage customers take up the option to make interest repayments initially before switching to a roll-up arrangement.

Amendments to the Mortgage Conduct of Business (MCOB) rules following the Mortgage Market Review (MMR) mean that lifetime mortgage contracts which permit, but do not require, consumers to pay interest for a period are subject to the requirement of providers to assess their affordability.

This is despite the fact that payments of interest are always optional and that customers will never be at risk of losing their home as a result of being unable to continue with interest payments.

As a result, some customers who would have taken out a lifetime mortgage giving them the option to repay interest for as long as they wished might not now pass affordability assessments, may be reluctant to subject themselves to the assessment process or be recommended alternative products.

The Council has asked the FCA to consider whether a relaxation of rules originally designed for residential rather than lifetime mortgages would help more consumers unlock their housing wealth while protecting a larger amount of equity in their property. A relaxation might also support existing providers’ ability to expand their product range and encourage new entrants.

Source : www.equityreleasecouncil.com/news/


Your home may be repossessed if you do not keep up repayments on your mortgage.


Surge of drawdown activity as equity release gains momentum

Homeowners over the age of 55 unlocked a record amount of housing wealth via drawdown lifetime mortgages in the final quarter of 2015, pushing annual equity release lending to a new high of ?1.61bn according to year-end results from the Equity Release Council (The Council).

Lending via drawdown products totalled ?271m between October and December 2015, the largest quarterly total since this type of lifetime mortgage first emerged in 2004. Seven in ten (70%) new plans agreed in Q4 2015 were drawdown, up from 63% in Q3 2015, as more customers opted to withdraw their housing wealth in stages to boost their retirement income as and when they need it.

Drawdown lending for the whole of 2015 was also the highest on record at ?961m. It pushed total equity release lending activity by members of The Council? to an unprecedented ?1.61bn: up 16% from ?1.38bn in 2014. Last year saw more than 22,500 new plans agreed for the first time since 2008.

The market’s second half performance was even stronger, with total lending of ?898m in H2 2015 up 21% from the previous half-year record of ?741m in H2 2014. Both drawdown and lump sum products saw H2 lending grow 21% year-on-year, with drawdown passing ?500m (?538m) for the first time in any half-year period. The value of home reversion plans – ?4.5m – was the most in any half-year period for four years (since H2 2011)

At 22%, the year-on-year lending growth rate in Q4 2015 was the largest of any quarter last year, despite a slight dip in quarterly lending from ?453m in Q3 to ?445m.

Read more at www.equityreleasecouncil.com/news/


Your home may be repossessed if you do not keep up repayments on your mortgage.


Potential value of equity release market hits '£361bn

The potential wealth available to over 55s in the UK through equity release stands at £361bn, according to new research from Retirement Advantage.

The findings come as the Equity Release Council reports that equity release lending reached a new high of £1.61bn in 2015, surpassing the former £1.21bn peak achieved in 2007 by 33%.

Alice Watson, product and communications manager at Retirement Advantage Equity Release, said:

“The latest lending figures from the ERC confirm that equity release is increasingly becoming an integral part of retirement planning in the UK. The market is growing rapidly, but clearly still has a way to go, with less than one per cent of housing wealth available to over 55s being accessed through equity release.

“As an industry, we have plenty of work to do to ensure that retirees understand all the options available to them. For many, their home will be their most valuable asset, and we should encourage them to understand that they can access the wealth stored in their homes without having to sell up.”

The research also shows that while most housing wealth per home is still available in the South of England, regions outside the traditional equity release heartland are catching up fast. Property values grew faster in the North of England and East Anglia than the South East over the last year. 
   
The South East tops the regional list for potential equity release value available to over 55s in Q4 2015, with a total of £76bn, followed by Greater London, where an estimated £57bn is available. Greater London saw the fastest annual growth in property value, up 16.8%, while East Anglia and the North, up 16.7% and 14.5% respectively, both saw more substantial increases than the South East, up 9.9%. The greatest quarterly increase in house price growth was reported in the North, at 6.6%, compared to 3.5% in London. 

Alice Watson commented:

“With housing wealth among over 55s continuing to rise rapidly in the UK, we expect to see retirees taking an increasingly holistic approach to retirement. The regional distribution of this house price growth demonstrates that it’s not just in London and the South East where property can help to secure a comfortable retirement. House price growth is accelerating throughout the UK, with the North of England and East Anglia in particular reporting substantial increases in property wealth.

“As the ERC looks to celebrate the 25th anniversary of its first industry standards, we welcome the Council’s efforts to build on the policy recommendations it made in October last year. Protecting borrowers and upholding best practice across the equity release sector is integral to ensuring its continued growth.”

Source www.financialreporter.co.uk


Your home may be repossessed if you do not keep up repayments on your mortgage.


Equity release lending hits record high in Q4

Retirees unlocked a record amount of housing wealth via drawdown lifetime mortgages in Q4 2015, pushing annual equity release lending to a new high of £1.61bn, according to year-end results from the Equity Release Council.

Lending via drawdown products totalled £271m between October and December 2015, the largest quarterly total since this type of lifetime mortgage first emerged in 2004. Seven in ten (70%) new plans agreed in Q4 2015 were drawdown, up from 63% in Q3 2015, as more customers opted to withdraw their housing wealth in stages to boost their retirement income as and when they need it.

Drawdown lending for the whole of 2015 was also the highest on record at £961m. It pushed total equity release lending activity by members of The Council¹ to an unprecedented £1.61bn: up 16% from £1.38bn in 2014. Last year saw more than 22,500 new plans agreed for the first time since 2008. 

The market’s second half performance was even stronger, with total lending of £898m in H2 2015 up 21% from the previous half-year record of £741m in H2 2014. Both drawdown and lump sum products saw H2 lending grow 21% year-on-year, with drawdown passing £500m (£538m) for the first time in any half-year period. The value of home reversion plans – £4.5m – was the most in any half-year period for four years.

At 22%, the year-on-year lending growth rate in Q4 2015 was the largest of any quarter last year, despite a slight dip in quarterly lending from £453m in Q3 to £445m.

Since falling to a post-recession low of £789m in 2011, annual equity release lending has more than doubled in the last four years and now exceeds its pre-recession peak (£1.21bn in 2007) by 33%. Over the whole of 2015, drawdown lifetime mortgages accounted for two in three (66%) new plans agreed, while lump sum lifetime mortgages made up 34% and home reversions below 1%.

Since publishing a set of policy recommendations for Government in October 2015, The Council has made further recommendations to the Treasury and the FCA to help develop the market and meet growing consumer demand for using housing wealth in retirement planning.

Article Source www.financialreporter.co.uk


Your home may be repossessed if you do not keep up repayments on your mortgage.


Equity Release: Your questions answered

Borrowing against your home to boost your lifestyle in retirement isn’t something you enter into lightly. But work with tried and trusted experts, such as the UK’s number one equity release specialist Key Retirement, and you could unlock a life-changing amount of cash. With more than 10,000 plans agreed in the first half of 2015,* the equity release market is booming. If you are considering releasing some of the cash tied up in your home, here are the answers to some questions you may have: 

What is equity release?

Equity release is a way for homeowners aged 55-95 to tap into some of the cash locked in their homes. The money you release can be spent in any way you choose, whether on home improvements, a well-deserved holiday, or even treating your loved ones. Typically there are no monthly payments to make as the full amount owed is designed to be paid from the sale of your home when both you and your partner die, or move into long-term care. What’s more, the money released is absolutely tax-free. Equity release will reduce the value of your estate and may affect your entitlement to means-tested benefits.

Could I leave a debt to my estate because of equity release?

The simple answer is no. All Equity Release Council approved products feature a ‘no negative equity guarantee’, which means that your estate will never owe more than what your property is worth when it’s sold. So in the event that the value of your house won’t cover the amount owed, the rest of it will be written off.

Will I still be able to leave an inheritance for my family?

Equity release will affect the inheritance you leave, however there are certain plans on the market which allow you to ring-fence a percentage of your estate to leave to your loved ones. This can provide you with a certain amount of peace of mind as you know that there will always be something left to pass down. All equity release sales must be accompanied by advice. It is important to obtain advice from an equity release specialist, who will ensure you are made fully aware of what taking out a plan means for you and your family, both now, and in the future. 

I know what I need money for now, but what if I need access to funds in the future?

By far the most popular type of equity release plan is a drawdown lifetime mortgage. With a drawdown plan, you release an initial amount of cash to start with, followed by subsequent withdrawals as and when you need the money. Interest is only charged when the amounts are released, therefore taking the funds in stages over a number of years, rather than one large lump-sum at the outset, can reduce the accumulation of interest on the loan quite considerably.

Will I still own my home?

With a lifetime mortgage, the most popular type of equity release, your home remains you own. You have the right to continue living there for as long as you choose or, equally, you are free to move home at any point in the future and take the plan with you (subject to provider criteria).

*Equity Release Council, Autumn Report 2015.

Source www.express.co.uk

Your home may be repossessed if you do not keep up repayments on your mortgage.


Record number of pensioners cashing in

A record number of pensioners are extracting some of the wealth in their homes to boost their retirement income, a new study reveals.

Retirees extracted wealth from their homes at a record rate of £4.7million a day last year, as thousands decided to cash in on the rising value of property across much of the UK.

While many used the freed-up cash on nice things such as holidays and home improvements, the majority used it to pay off debts, the new figures from Key Retirement suggest. The total value of property wealth extracted through equity release rose by 24 per cent last year from £1.38billion to a record £1.71billion.

Equity release is becoming increasingly popular as Britons start to consider their homes as part of their retirement portfolio, as well as being somewhere to live.

Read more at www.dailymail.co.uk


Your home may be repossessed if you do not keep up repayments on your mortgage.


Equity release boom predicted for next two years

Advisers are anticipating a boom in equity release over the next two years, according to research by Key Partnerships.

Independent research conducted on the firm’s behalf in November with 106 advisers specialising in retirement planning, found 65 per cent anticipate an increase in client enquiries relating to equity release to fund at least part of their retirement.

A further 44 per cent said that the pension freedoms will provide opportunities for clients looking to access equity in their home as part of their retirement planning.

Will Hale, director at Key Partnerships, said all advisers should be discussing ways to release property wealth with clients, as it plays an increasingly important role in long-term planning.

However, he noted that advisers need to plan ahead on how they expand into equity release and it is important that they seek specialist support.

“Not all advisers want to specialise in equity release, but are aware that they should be offering access to advice for their clients.”

Mr Hale added that one major growth area will be the tax advantages from using property wealth ahead of pension savings, with more than half of advisers pointing to this.

Equity release lending increased by £68.3m in the third quarter of last year, in the biggest quarterly rise since 2004, according to the latest Equity Release Council figures.

Source www.ftadviser.com


Your home may be repossessed if you do not keep up repayments on your mortgage.


Downsizing not ideal - what about equity release?

For many people, the thought of downsizing to a smaller home when they hit retirement simply isn't palatable – but that doesn't mean they can't benefit from their home's accumulated equity to boost their retirement income. What about equity release?

Reluctance to leave

Research from Key Retirement shows that the average equity release customer has lived in their home for 21.8 years before cashing in on their property wealth, while nearly one in three has lived in their home for 30 years or more. This illustrates why downsizing isn't an option for many, said Key, with many reluctant to leave the home they've been in for so long, and that's before we consider the level of extra fees they could have to contend with.

They could have built up a nice amount of equity, too: the figures show that, on average, homeowners who bought properties in early 1993 would have seen UK house prices rise from £60,850 to around £203,800 – an increase of nearly £143,000 – which could provide a welcome boost to retirement finances. Not only that, but downsizing could result in a chunk of that money being lost through stamp duty, with 2% being charged on the proportion of their new property's value over £125,000, rising to 5% for the proportion above £250,000.

"Stamp duty, legal and removal fees and the cost of turning their next house into a home make downsizing an expensive option for many," said Dean Mirfin, technical director at Key Retirement. "The upheaval and risks of losing touch with friends and family as well as local services, including healthcare, can all impact negatively on the decision to move, as well as the fact that these homeowners are very attached to their homes, which they have invested in for many years."

Lack of suitable homes

Aside from the emotional and financial reasons for many retired homeowners to stay put, there's another clear practical one, and that's the sheer lack of suitable homes available for retirees. The number of homes for sale hit a record low in November, too, which only compounds the issue.

So, while downsizing may appear to be the logical solution for many, it isn't always that simple in practice, said Key, as it "overlooks a wide range of issues that are important to retired homeowners". This is where equity release can really come into its own.

"Equity release customers are accessing an average of nearly £75,000 from their property wealth without having to tackle the financial and emotional issues involved in moving home," added Dean.

"The average customer has owned their home for nearly 22 years and has clearly benefited from house price growth but prefers to stay in their house rather than going through the upheaval and costs of moving. Until we are building the right sort of properties and in the right quantities, both the maths and availability to facilitate downsizing remain a huge challenge."

Article source http://moneyfacts.co.uk/news/retirement/downsizing-not-ideal--what-about-equity-release/


Your home may be repossessed if you do not keep up repayments on your mortgage.


Over-55 homeowners underestimate property wealth by £90,000

-          60% have not had their home valued since first buying it, almost 18 years ago

-          Estimated price increase of 156% compares to 244% reported by official data

-          Over-55s’ equity gains are six times the size of the average single pension pot

-          Homeowners in all but one UK region – the East Midlands – underestimate house price growth over the last ten years

-          Four in five (80%) would consider using housing wealth to help pay for later life

Three in five older homeowners (60%) have not had their house valued since they first bought it almost 18 years ago, according to new research by the Equity Release Council (The Council).  It leaves many over-55s with far greater housing wealth than they realise, which could be used in later life to help fund a more comfortable retirement.

The Council’s research shows the average UK homeowner aged 55+ paid £100,756 for their existing home. Having lived there for an average of 17 years and 10 months, they now estimate it is worth £257,584.

This equates to an overall house price rise of 156%, leaving them with an extra £156,828 of equity even before mortgage repayments are accounted for. This figure alone is more than six times the average single DC pension pot at retirement (£25,000)¹ and almost three times the average amount used to buy an annuity (£55,750).²

However, The Council’s analysis suggests even this may underestimate the individual housing wealth held by over-55s. According to the Office for National Statistics (ONS), the average UK house price has risen by 244% over the last 17 years and 10 months.

Having originally been bought for £100,756 at the start of this period, the average property among over-55 homeowners could therefore have a value of £346,861 today: almost £90,000 (£89,277) more than they estimate.

read the rest of this item at http://www.equityreleasecouncil.com/news/over-55-homeowners-underestimate-property-wealth-by-200000/


Your home may be repossessed if you do not keep up repayments on your mortgage.


Mortgages: Nearly one million 'face difficulties'

Nearly a million homeowners have no way of paying off their mortgages because they opted for interest-only loans, according to Citizens Advice.

The new figure is much higher than previous estimates from lenders and from the City watchdog, the Financial Conduct Authority (FCA). Citizens Advice said 934,000 owners did not have a plan for how to pay back the money at the end of the mortgage term.

It warned that time was running out for some to organise their finances. They faced having to sell their homes or even have the property repossessed if they were unable to find other funds, the charity said.

'Silly'
Millions of buyers were sold interest-only mortgages before rules were tightened up three years ago. Without the need to pay back some of the loan each month on top of the interest, they could borrow more to buy their dream homes.

Sarah, who lives near Brighton and has an interest-only mortgage, said she and her husband could hardly afford the interest when they bought their house and frequently fell into arrears.

"We were silly. We'd just had our first baby," she said. "But they shouldn't have given the loan. We didn't understand what we were taking on and didn't think about having to pay it back."

They have 16 years until they have to return nearly 200,000 pounds, but admit the debt has become a constant worry.

'Financial black hole'
Citizens Advice has estimated that out of the 934,000 who have no plan in place to repay the loans, more than 432,000 have not even thought about the issue. "People buy a home for stability, but interest-only mortgages have forced many into a financial black hole," says the charity's chief executive, Gillian Guy.

Two years ago the FCA calculated that a far smaller number, around 260,000, had no strategy to pay off their mortgages. Part of the explanation could lie in different estimates of the number of interest-only loans.

The FCA put it at 2.6 million, a figure which the Council of Mortgage Lenders (CML) believes has fallen recently to 2.4 million. But Citizens Advice has arrived at a total of 3.3 million borrowers, by taking into account the fact that many couples have joint mortgages.

And it argued that its polling had produced a more accurate picture of the proportion who have little prospect of dealing with the debt.

Endowments
The first sizeable wave of repayment problems is expected to appear in 2017-18, when endowment mortgages sold in the 1990s reach their peak period of maturing. A decade later, in 2027-28, the surge in interest-only mortgages taken out from the early 2000s reaches a high point. And the final peak comes in 2032 when the wild lending to people who could barely afford the interest, just before the credit crunch, has to be dealt with. Banks and building societies were told by regulators to write to their customers to warn them that they could be in financial danger.

In some cases they have converted interest-only mortgages into Lifetime Mortgages, which allow borrowers to stay in their homes though retirement, paying interest if they can. The debt is paid off when they die or have to move out. But Citizens Advice is calling on mortgage providers to do more, including phoning people and offering face-to-face meetings, to help them prepare for the day when the demand for repayment arrives. It also wants greater protection for interest-only borrowers, to force the lenders to consider a range of alternatives before trying to repossess a home.

The CML, which represents mortgage lenders, said: "Lenders will continue to communicate directly with customers in a variety of ways and to raise consumer awareness. "Borrowers should not ignore attempts to communicate with them. The lender is trying to help and reduce the risk of shocks at the end of the mortgage term."

A spokesman for the FCA said: "We expect firms dealing with interest-only borrowers to discuss repayment strategies and propose solutions where there are no plans in place. "While we have seen many firms progress with this, borrowers must also engage with their lenders now to resolve it, we will also continue to monitor lenders as part of our normal supervisory work."

By Simon Gompertz Personal finance correspondent, BBC News


Your home may be repossessed if you do not keep up repayments on your mortgage.


Funding care needs

At the other end of the spectrum are those that want to use equity release to help fund their care needs, enabling them to stay put and receive care in their own home. 


Your home may be repossessed if you do not keep up repayments on your mortgage.


Over-55s suffer financial hardship
Research from the equity Release Council has revealed that in the last month three in 10 over-55s (31%) have been stressed for financial reasons and a similar proportion (30%) faced sleepless nights.

Even worse, one in 10 (9%) has suffered the cold because of unpaid bills while one in five (19%) has skipped meals.

Nigel Waterson, chairman of the Equity release Council, said: "These findings are a stark reminder of the financial pressures many people face in later life and counter the perception that many have of the baby-boomer generation as universally carefree and prosperous.

"Despite benefiting from rising house prices which have boosted their property assets, many homeowners are cash-poor in later life and still find it a struggle to meet routine costs.

"Rather than suffering in silence, we must increase peoples' knowledge of their options and encourage more people to take advantage of the property wealth they have accrued to fund a more comfortable lifestyle."

Currently a quarter (24%) of over-55 homeowners have used their housing wealth to boost their finances, commonly for home or garden improvements (45%), to pay off loans or credit cards (29%) and to cover everyday costs like bills (7%).

A third (34%) are keen to discuss property wealth as part of the new ‘guidance guarantee' service Pension Wise, which launches on 6 April 2015.

Waterson added "Many homeowners have regularly remortgaged as a way to use their housing wealth to their advantage.

"Doing similar in retirement through a lifetime mortgage is a rational choice in many cases.

"It makes no sense to abandon this option later in life when many people are cash-poor, asset-rich and have much to gain in terms of a more comfortable and financially stable lifestyle."

Source : www.mortgageintroducer.com
Your home may be repossessed if you do not keep up repayments on your mortgage.


Who opts for Equity Release?
Issues such as the changing attitudes to leaving an inheritance, the desire to see family members benefit whilst you’re still around, and the continuing impact of the financial crash are just some of the reasons why both the typical client and how an equity release loan is used has widened markedly over recent years.  It’s no longer right to simplistically view it as a product of last resort, as instead, it now plays an increasingly important role within the whole retirement planning process.
Your home may be repossessed if you do not keep up repayments on your mortgage.


Baby boomers (and their 'standard' mortgages)

A recent development for equity release is the recognition that a number of standard mortgage loans were on an interest-only basis.  And at the end of the term there may not be enough in the way of investments to settle the loan.  In this instance, an equity release loan may make up the difference.


Your home may be repossessed if you do not keep up repayments on your mortgage.


Meeting existing costs

Of course, plenty of borrowers will want to use the loan to help cover everyday costs, or simply to enable them to undertake one or two improvements around the home.  Or for those special purchases, such as a new car, or covering the cost of a holiday of a lifetime.


Your home may be repossessed if you do not keep up repayments on your mortgage.


Helping the family

In some cases, the planholder may not require funds for their own needs, but are keen to help out family members now (rather than through any inheritance).  This may cover, for example, university & school fees, or assistance with a deposit to get on the housing ladder.


Your home may be repossessed if you do not keep up repayments on your mortgage.


So who's the typical borrower?

The typical customer releases less than a quarter of their property wealth, with the 65-74 age group accounting for 56% of loans, and the 55-64, and 75-84 age groups, take 17% and 23%, respectively.  Married/co-habiting couples form the majority of those that take out plans (66%), widowed (16%), divorced/separated (10%), with singles making up the rest.   And with the oldest person taking out a plan in the first half of 2014 being 102, and the youngest 55, it shows that equity release could be for everyone.

(Source: Equity Release Council, Autumn 2014 Market Report, 1st half 2014)


Your home may be repossessed if you do not keep up repayments on your mortgage.