MortgagesJun 24 2016

Release the pounds

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      CPD
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      Release the pounds

      Equity release was once viewed as a last resort. Given the amount of time and hard savings necessary to secure and repay a mortgage, to then relinquish full ownership of a property, or borrow against it, was a tough pill to swallow. But the financial environment is constantly evolving and equity release is now becoming more popular as providers seek to appeal to a wider section of retirees.

      Flexibility is paramount for many when considering financial products, which is why the pension freedoms were so widely welcomed, and the facility to increase or decrease mortgage repayments is so widely used.

      The concept and application of equity release is captured, generally, by two of the biggest financial transactions: property and pension. Consumers have varying specific retirement goals but the financial capability to attain these is supported by property ownership and retirement income. However, when either of these has not been achieved at retirement, a contingency plan must be sought; and using fixed assets is often the one remaining consideration.

      Even after what could be viewed as sensible financial planning, problems can still be encountered further down the line. For example, a non-escalating annuity could be beneficial in the early stages of retirement; but over the years, as inflation bites, income levels may erode causing desired expenditure to be unsustainable. If left with a lack of available options, many are forced to turn to their own home.

      “Equity release is finally coming into its own,” says Stuart Wilson, channel marketing director at retirement lending specialists, More 2 Life. “Years ago it was probably seen as a distress purchase, something when you’re absolutely desperate and need some cash to see you through the last few years of your life. Today, it’s a product which advisers and consumers are taking a fresh look at and saying, ‘This is something that could actually transform my retirement.’”

      Will Hale, business development director at Key Retirement, cites the broadening appeal of equity release, which has been driven by improvements in product development. He says, “It was very much focused at the lower socio-demographic section of the population and these days, while it still serves a purpose for that segment, it has a far more diverse application. It can now be used by people who are typically classed as mass-affluent or even high-net-worth or people who are very asset- rich but remain income-poor.”

      Growth

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