‘My client released £6k equity from their home to pay energy bills’

Search supported by
‘My client released £6k equity from their home to pay energy bills’
[Anthony Devlin/Bloomberg]Equity release adviser Jan Johnson has noted an uptick in lifetime mortgage products being used to prevent repossessions, and in some cases even to cover bills

“People without drawdown facilities haven’t been able to access their funds. And those with a facility are facing very high rates," she explained.

“There’s less choice. It’s not a whole-of-market offering right now.”

Between September and October, the number of lifetime equity release deals dipped 12 per cent, from 597 to 527 according to Moneyfacts.

Meanwhile, the average interest rate on a fixed lifetime equity release deal jumped from 6.03 per cent to 7.55 per cent between these two months.

This rate is around 1 percentage point higher than the average rate on a residential mortgage - which sits just below 6.5 per cent at present.

Repossession on the rise

One scenario Johnson is seeing an increase in is the number of clients facing repossession orders following monthly increases - by as much as £1,000 in some cases - on their mortgage repayments.

Between April and June, mortgage possession orders increased from 400 to 2,382 (496 per cent), warrants from 525 to 2,419 (361 per cent) and repossessions by county court bailiffs increased from 45 to 770 (1,611 per cent), according to the Ministry of Justice.

With interest rates having risen significantly, and with few lenders cutting them by much just yet, borrowers coming to the end of their mortgage terms are still facing big jumps in interest rate repayments.

While lenders such as Santander have said borrowers should look into extending their term length, lenders can be reluctant to do this for older borrowers - those aged around 65-70 - according to Johnson.

It’s either: get your home taken from you, or take an 8 or 9 per cent mortgage.Jan Johnson, 55 Plus Equity Release

“They aren’t extending mortgages [for this age group]. They’re switching them to new mortgages, and payments are going up. Some by £1,000 a month,” she explained.

“People are facing repossession in this circumstance. Quite a lot of them. In the past few months, we’ve had people coming to us in this situation at a loss as to what to do.

“It’s through no fault of their own. These are mostly self-employed people, who received no help from the government during the pandemic, who have missed payments.”

Once a borrower misses four payments on residential mortgage, a lender has to start proceedings against them.

“It’s either: get your home taken from you, or take an 8 or 9 per cent mortgage,” said Johnson.

In some cases, however, borrowers can use a lifetime mortgage to service the debt.

One client of Johnson’s is taking a lifetime mortgage offer to court in order to stop proceedings against them by a lender.