Lifetime mortgages or, to use their more colloquial name, equity release schemes are currently enjoying a period of dramatically increased popularity.
In the second quarter of 2018, nearly £1bn of finance was raised in this way, equating to approximately £10m a day and more than double the equivalent figure in 2016. At the time of writing, there are no less than 86 different equity release products available on the UK market, whereas, just a few years ago there were only a handful.
Why the explosion, and why now?
Such products were once seen as an expensive last resort finance for those experiencing financial difficulties. Now, attitudes have shifted, and they make perfect sense for an increasing number of people who simply want to release some of the money tied up in their residential home.
This can be for a wide variety of purposes. For example, as we are all tending to live longer, healthier and more active lives, many people want to supplement their income in retirement. Others want to clear debts, spend some money on home improvements or take the holiday of a lifetime. Alternatively, many parents and grandparents are raising money to help younger generations get a foot on the property ladder.
In short, people who would once have downsized to achieve the same objectives, have discovered that they don’t, after all, have to give up the family home with its memories and familiarity. They can raise cash without the wrench and upheaval of moving house, and still maintain or, even, improve their quality of life.
Along with the market’s expansion has come evolution and growing maturity.
The equity release sector is now tightly regulated by the Bank of England’s Prudential Regulation Authority. There is also an Equity Release Council made up of leading members in the sector to establish and monitor a strict code of professional conduct.
Furthermore, potentially sensitive issues such as fees and interest charges are nowadays transparent for all to see and some of the financial services industry’s big names – companies like Legal and General and Aviva – have entered the market bringing added stability, competition and respectability. Newspapers, too, like the Daily Telegraph and Daily Mail have become active in promoting their own branded equity release schemes, as has Reader’s Digest. In short, the market has expanded and developed to meet the increased consumer demand for more opportunity and choice.
However, it is important to emphasise that, while raising money on your home may have become easier, it is still a major decision that should not be taken lightly. It is often a family decision – one that should be entered into openly and with the full knowledge of all those in the family who are likely to be affected.
Anyone seeking to raise money in this way should take the time to conduct their own research, talk to people in the know and, above all, seek professional advice. As in any other market, products are not all the same and you need to find the one that is appropriate for you. Some interest rates may be fixed, others may be variable.
There will also be charges, ranging from valuation fees to solicitors’ fees, arrangement fees and possibly adviser fees. Consumers need to know exactly what the lifetime mortgage they are interested in involves before making a decision.
Many people value face-to-face discussion, particularly if a number of family members need to be involved. Omnium Wealth’s own experience is that some people need more than one meeting, to fully understand and feel comfortable before taking on a lifetime mortgage.
In summary, equity release is an increasingly popular way of releasing funds from your home, but, advice from a professional financial expert should always be sought.
“I have given my children (and grandchildren) money today that they can invest for their future. I would recommend Omnium Wealth Management because the [equity release] process was efficiently and sensitively handled.”
Mrs W, London, Omnium Wealth Management equity release client.
Get in touch
If you’d like to talk to our equity release expert about raising funds on your home, please contact us on 01483 205890, or email [email protected]
Interested in finding out more?
Read our equity release case study
Raising money from your home using equity release
Read our guide
An introduction to equity release