by Mark Johnston
Equity Release Hits a High.
It seems that as a nation we are becoming more aware of the shortfalls in pension income, with an increasing number of people finding they are unable to save sufficient funds for the duration of their retirement.
The fact is that the growing cost of day to day living shows no sign of leveling out or subsiding anytime soon.
This may then influence the over-55s to look in to clear their mortgage debt and other credit commitments as they enter retirement, make one off payments for home improvements or provide financial support to family and friends.
Therefore according to a house of lords committee, equity release should be one of the key solutions for a Britain that iswoefully under prepared for the expected explosion in the number of older people.
Though analysis shows that equity release schemes dipped in value after the recession.
However, new data for the first half of 2013 showed the equity release market has now grown by 29 per cent in the last two years.
Homeowners aged 55 plus released £473 million of housing wealth in the first six months of the year and the total value of plans agreed in the first half of 2013 jumped by 12 per cent year on year.
Figures show that 14 per cent more people took out an equity release product in the first half of 2013 than in the first half of 2011.
Research reveals that Intermediaries were responsible for almost all completions, in fact nine in ten borrowers used an independent financial adviser in the first half of 2012 and this proportion increased to 93 per cent in 2013.
It also appears that more people are opting to receive a bulk payment from their housing wealth rather than smaller, regular instalments. Although the typical amount of equity released fell slightly from the first quarter of the year: down from £55,985 to £54,196 in the second quarter of 2013.
Nigel Waterson, chairman of the Equity Release Council, said: “These figures show an extremely strong first half of the year for the equity release industry. If growth continues at its current rate then the annual market value could exceed £1 billion for the first time since 2008.
Steve Wilkie, managing director of Responsible Equity Release (RER), a specialist broker added “It is a good time at the moment to remortgage because equity release interest rates are at record lows, with a selection of rates below 6 per cent”.
Nevertheless Age Partnership equity release technical manager Simon Chalk has commented that “we are a long way from equity release being considered a mainstream financial planning tool for later life.”
With this particular comment in mind some experts feel that there is a reason why equity release is still a niche market in Britain, it is because it simply does not work and should only ever be used as a last resort by much older pensioners desperate for cash.
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