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sarahbell

Equity release 2017

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Homeowners release record £3 billion equity in 2017

https://www.telegraph.co.uk/financial-services/retirement-solutions/equity-release-service/equity-release-schemes-popularity

It is clear that unlocking housing wealth has an increasingly i mportant role to play in helping older
people pay for later life. Analysis from the Equity Release Council earlier this year estimated that
total homeowner equity in England has reached an unprecedented £2.6 trillion, with £1.8 trillion
belonging to over-55 households. Customer data suggests that those using equity release have
homes worth around 25% more
than was the case just three years ago

 

http://www.equityreleasecouncil.com/document-library/equity-release-market-report-autumn-2017/

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As long as they're reputable firms is this a problem?  One or two retired people living in a house worth a lot but they themselves are skint want to get some money without having to move.

This seems like a good idea tbh:

Lifetime mortgages are the most popular type of equity release plan as they are typically very flexible, often enabling you to draw down funds as and when you need them, or to make voluntary or partial repayments if you want to. The Council said that 75% of new plans agreed in the last three months of 2017 were drawdown lifetime mortgages, up from 64% in the same period last year. Across the year as a whole, 71% of new customers opted for drawdown plans.

 

Just using my own example I intend to retire well in advance of my pensions' due date and knowing that the penalties for taking them early are high.  So I could take out and run up a lifetime mortgage in the ten years prior to the pensions kicking in and then start paying it down when they do; including using the 25% that I can take in cash.

You can look at it as being a cheap way to make substantial borrowings.

 

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Essentially the increase in housing costs have been used as a mechanism to make young people pay for the retirements of older people, with the byproduct of the banks making money as intermediaries.  

I suppose it works as a system, but it would have been considerably easier to just have the younger people pay for the older people's retirements directly -- this is how it used to work.  But this way the transfer is hidden so people don't notice it.

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1 minute ago, dgul said:

Essentially the increase in housing costs have been used as a mechanism to make young people pay for the retirements of older people, with the byproduct of the banks making money as intermediaries.  

I suppose it works as a system, but it would have been considerably easier to just have the younger people pay for the older people's retirements directly -- this is how it used to work.  But this way the transfer is hidden so people don't notice it.

Exactly.  Try everything other than letting prices drop.  

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11 minutes ago, dgul said:

Essentially the increase in housing costs have been used as a mechanism to make young asset poor people pay for the retirements of asset rich older people, with the byproduct of the banks making money as intermediaries.  

I suppose it works as a system, but it would have been considerably easier to just have the younger people pay for the older people's retirements directly -- this is how it used to work.  But this way the transfer is hidden so people don't notice it.

FTFY

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Typically after 10 years the amount outstanding doubles as unless you opt for an interest service mortgage it's all rolled up. They are good for those income poor asset rich oldies although some will be looking to pass on the inheritance early and increasingly families are using the funds to keep their parents in their homes rather than a nursing home in the last few years of life.

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