Record Number Of Retired Brits Exploring The Option Of Equity Release Products
According to a report recently released by Safe Home Income Plans (SHIP), a record number of retired British homeowners explored the option of equity release products in 2006. SHIP, the trade body that represent more than 90 percent of this sector, said that it expects figures in pounds sterling demanding one of the two main types of equity release products to exceed £1.2 billion for 2006, with this figure likely to rise to more than £1.71 billion in 2007.
Equity release products, which allow retired homeowners in the UK to cash in on the residue equity value in their homes, without having to vacate the property, have become increasing popular as retired Brits look for ways to cover any shortfalls they may have in their pension products and to help cover the increase in the cost of living. SHIP figures for the second and third quarters of 2006 show a 12.3 percent increase in demand for equity release products; the main two of which are lifetime mortgages and reversion schemes.
With lifetime mortgages, retired UK homeowners are allowed to secure a loan against their property. In the case of reversion schemes, the homeowner sells all or part of their property in exchange for either a lump-sum payment or a regular monthly income.
In related developments, Unbiased.co.uk, an independent financial adviser, has said that more than 13,000 people have searched its website for information relating to equity release products and the Chartered Insurance Institute has claimed that with a growing number of retired Brits being 'asset-rich, but cash-poor', retired homeowners in the UK are 'increasingly looking to home reversion plans' as a means of generating capital without the emotional strings associated with having to sell the homes they have come to love.
However, John King, chief executive of SHIP, expressed concerns that there may be a shortfall in the number of independent financial advisers who are able to give retired UK homeowners seeking information about these product an informed opinion. Mr. King commented that: 'Reassurance of the security of all products provided by SHIP members must be made apparent and more confidence needs to be instilled among the IFA community.' In order to provide advice on equity release products, the independent financial adviser must have a Certificate in Lifetime Mortgage Advice (C7) awarded by the Chartered Insurance Institute.
Keep in mind, however, that while lifetime mortgages are currently regulated by the Financial Services Authority (FSA), reversion schemes still remain unregulated – although there are plans in place to bring them within the remit of the FSA. As such, any retired UK homeowners contemplating this course of action should think long and hard about whether or not this is the right thing to be doing.
Alisdair Milton
1st January 2007
More Information:
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How have Britons financed the billion of pounds spent on home improvements this year? Mostly through personal loans, although other forms of payments have been used as well.
- For those with good credit, a mortgage in decent standing, and a relatively (depending on the bank's definition) sizeable difference between a home's worth and the balance of a mortgage, a home equity line of credit may be a good option for those needing a loan
