As more, older home-owners choose to make use of the equity built up in their homes, 2016 proved a good year for equity release lending. Specifically, data from the Equity Release Council (ERC), showed it broke the £2 billion barrier for the first time on record.
A particularly large rise in equity release lending during the fourth quarter of 2016 fuelled the record breaking year, as 8,303 equity release plans were agreed in those three months alone. That was a 30% increase compared with the fourth quarter of 2015 and also 12% up from the number of agreed equity release loans in the third quarter of 2016, the data showed. In total, 27,563 new equity release plans were taken out over the course of 2016.
“Equity release products have been around for some 30 years, but as the product has changed and more guidance and protection has been introduced, it is continuing to grow in popularity,” said Fulham estate agent Lawsons & Daughters. “A pretty consistent increase in house prices is also prompting increased interest in the product too.”
When equity release initially hit the market in the 1980s, the typical type of agreement was for a lender or private company to buy a portion of your home, with the principle amount and interest on it only repaid once the property was sold. But now, with Financial Conduct Authority (FCA)regulation and lifetime mortgages becoming more popular, there is a little less risk involved and a lot more transparency.
As part of the protection now available, lifetime mortgages operate under rules which mean the home-owner who has taken the product out will never face a total repayment that exceeds the value of the property. But, although there are more rules and reliable oversight of Equity Release lending, home-owners should still err on the side of caution and seek professional advice before agreeing to an equity release product.
“Equity release products are credible but it can be easy to mistake how quickly the compound interest attached to them can build up, particularly when no repayments will be made until the property is sold,” said Belgravia estate agent Best Gapp. “If you’re in any doubt, speak with an expert before making any decisions.”
Of course, the ERC continues to work hard to ensure credible, helpful and transparent products and practices are upheld across the Equity Release industry. That’s because it believes Equity Release lending can provide financial support where it’s needed. And, it can also make up a diverse retirement plan.
Indeed, highlighting ERC’s quest for transparency and support for older home owners, ERC chairman Nigel Waterson said: “Passing the £2 billion mark for the first time indicates that housing wealth is becoming an increasingly important focus of retirement planning,” adding: “With increased recognition of the role housing wealth can play, we look forward to working closely alongside government, regulators and industry to help support the UK’s ageing population.”
Working hard to keep the industry linked with the Government and following all the rules and regulations associated with it are followed closely, is an important role. It’s also one that can go a long way to making sure people and families don’t end up in an unexpected and difficult financial position later on.
“Sold, used and managed properly, equity release products can play a part in older home-owners’ financial well-being,” said Denhan Guaranteed Rent. “The ERC helps provide support to the industry and it’s up to those who are interested in using it, to make use of them and other experts, to ensure they understand all the options and possible outcomes.”