Jeff Prestridge  

In praise of equity release

Jeff Prestridge

Jeff Prestridge

Equity release is never far from my mind or heart.

My parents took out a plan a few years ago when they were equity rich but cash poor, with little more than a state pension and a decent annuity (thank you, Alan Steel of Alan Steel Asset Management) to provide them with a monthly income.

A nice man from equity release specialist Key sorted out a plan for them, although I kept an eye on things from afar.

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So, when dad died in May last year after a good innings, what brought financial reassurance at a time of overwhelming grief was that the annuity would keep paying out, albeit at a reduced rate (thank you again, Mr Steel).

And that because of the equity release, mum, in her early 80s, could keep on living in her tidy bungalow until such time that she needs to go into long-term care or she joins dad. By jove, she misses him.

Although mum occasionally moans about the cost of maintaining the home, I cannot envisage her anywhere else. She loves where she lives and there is a vast park on her doorstep where she can go and speak to her dog-walking friends.

Of course, I imagine there will be little left to inherit at the end of the day once the Aviva lifetime mortgage, now rolling up interest like an enormous sponge, has been paid off.

But I am chilled, as indeed I hope my three siblings are. Equity release has brought a degree of home comfort to the life of someone suffering great personal discomfort. That is not a bad result.

There was a time in the late 1980s and early 1990s when I would not have recommended anyone to take out an equity release plan. Those were the days of hare-brained investment-related schemes and products where the size of an outstanding loan could leave a horrible debt to be dealt with by children.

But the industry has come on leaps and bounds in recent years. The no negative-equity guarantee, meaning no one can now leave behind a loan higher than the value of their home, was the turning point.

But it is the drive towards making equity release more flexible – and consumer-friendly – that now makes it a financial product fit for purpose.

According to the Equity Release Council, the sector’s lobby group and overseer, product options are increasing all the time. Some 24 back in 2007, 58 two years ago and now 139.

The result is a range of products that now allows buyers to draw down money in stages (thereby mitigating interest costs), part-pay mortgage interest (again reducing the amount of interest being rolled up) and ring fence a slice of the home’s value so that it can be passed onto family and friends (so-called inheritance protection).