Equity Release is emerging as a solution to the care crisis to assist the ageing population.
This has been brought even more to the fore as a result of the coronavirus crisis, which has shown how important the people who work in residential care homes and provide care at home are.
Research for Just Group’s 2020 Care Report found that 64 per cent of those aged 75-plus said that, as a result of the Covid-19 crisis, they would try to ensure their future care needs are met in their own home rather than a residential care setting.
Steve Wilkie, chairman at Responsible Life, says after Covid-19 and the tragedy surrounding care homes, he expects demand for care at home to increase. And, according to him, equity release plans work nicely with this type of arrangement.
“Especially a drawdown plan, where you can set up a facility in line with the care costs over time,” Mr Wilkie explains. “Typically, customers requiring care at home tend to be at the older end of the age range.
“With rates low and with it the length of time it takes for a loan to double extending, these equity release loans may prove to be the cheapest. The longer a loan continues without any interest payments, the larger it gets.”
Equity release plans are usually repaid when the homeowner no longer needs the home, for example, when they go into residential care.
Government funding not enough
According to government figures, in the year to 31 March 2019, the average cost of residential care was, up from £604 in the previous year while the average cost of nursing care in the same period was £678 a week compared with £638 - a cost which fluctuates depending on region.
Fundamentally, the government cannot afford to pay for care for everyone who needs it, while the topic continues to get kicked into the long grass by policy makers.
Key Care Report (2020): Tackling the care question
Back in 2019, research by Key showed a strong desire among the majority of over-55s to remain in their own homes, but this was combined with a lack of preparation and knowledge about how to pay for care.
Will Hale, chief executive of Key, says it is harder for people to make smart decisions around paying for care.
He adds: “The simple truth is that most people are likely to need to pay for some or all of their own care which is not inexpensive.”
The report from Key highlighted that the cost of residential care homes per person per year – can range between £27,000- £39,000 or £35,000-£59,000 if nursing care is required.
Meanwhile, paying for care at home is less expensive at around £14,000 per year for two hours of help a day.