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201p

Are you thinking about releasing equity?

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They are trying to keep up with the Joneses, who have cash to splash from the pension freedoms
 

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Equity Release: £3.95 billion of housing wealth was unlocked via equity release between July 2018 and June 2019. This is up £450 million (12%) on the previous twelve months, despite some slowdown in H1 2019. In Q2 2019 alone, £911 million was unlocked via equity release. This exceeds the total amount that was being unlocked over four quarters just a decade ago.

It is notable that the use of drawdown mortgages now dominates the equity release market, representing more than two-thirds (67%) of new plans taken out in Q2 2019. Flexible use of equity release is growing fastest.

Pension Freedoms: £8.7 billion has been withdrawn from pensions via the pension flexibilities between July 2018 and June 2019. This is up £1.6 billion (23%) on the previous twelve months. Q2 2019 alone was an all time high, with £2.75 billion being withdrawn via the pension flexibilities.

https://www.aviva.com/newsroom/news-releases/2019/08/equity-release-and-pension-freedoms-reach-new-highs-in-the-uk/

 

 

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I've never understood the term "Equity release"... correct me if I'm wrong, buy isn't it essentially just taking out a loan against your house? Or is there actually a difference.

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1 hour ago, Hardhat said:

I've never understood the term "Equity release"... correct me if I'm wrong, buy isn't it essentially just taking out a loan against your house? Or is there actually a difference.

Its exactly that. If you do an internet search for Equity Release you will see that there are basically two types: https://www.moneyadviceservice.org.uk/en/articles/equity-release

  •  Home Reversion Loan;  the loan is repaid from the sale of your property after your death or internment in a care home.
  •  Lifetime Mortgage; these have more flexibility in that you can choose whether to pay interest or let it roll up and you can repay some of the principal during your lifetime.

Don't automatically reject them as interest can be fixed for the full term and currently rates start as low as 2.89%. This can be cheaper than renting a similar size property. It might suit some as a way of getting a lump sum to spend and reducing the equity available for your local authority to claim for your future care.

Make sure to spend it wisely :Old:.

 

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^ Yes... if you think about a few key things:

- future care cost liability

- inheritance tax

- the fact that you are mortal, and may as well enjoy some wealth rather than hoarding for the graveyard

- the fact that your dependents are mortal, and may value a smaller sum now orders of magnitude more than a larger sum much later on

- downsizing is often not that compelling a proposition given costs, attachment to homes and locations etc

It’s product worth seriously considering for many people.  The rates can be expensive but the product is offering a outcome of high social value.

Worth also noting that the insurers who hold most of these are getting increasingly nobbled by the Regulator on capital costs so they are not a free lunch for the City either.

 

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45 minutes ago, man o' the year said:

I think it is a scam. The equity released which seems to be in the region of 30% for a 60 year old seems very low. It is not something I would ever consider.

True but for the mortgages that’s mostly the effect of compound interest no?  Which is hardly a unique scam.

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1 hour ago, man o' the year said:

I think it is a scam. The equity released which seems to be in the region of 30% for a 60 year old seems very low. It is not something I would ever consider.

With a lifetime mortgage you have the option to pay the interest as it falls due. You can even pay up to 10% of the principal each year if you want. I think of it as a 10 year fixed term mortgage.

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10 hours ago, Hardhat said:

I've never understood the term "Equity release"... correct me if I'm wrong, buy isn't it essentially just taking out a loan against your house? Or is there actually a difference.

Thats how its sold!

Ive not met an average man in the street who crasps compounding interest.

'Im sure the banks would not sell something that is bad' (c) my mum.

'I dont understand percentages' (c) my mum

 

 

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