Category: Case study

When NHS theatre practitioner Andy Payne lost his wife to cancer 18 years ago the devoted dad reduced his hours to look after their daughter. Eighteen years later when the term expired on his interest only mortgage he was 62-years-old and £40,000 short and worried about what might happen. However, Age Partnership arranged a lifetime mortgage from Pure Retirement, at 6.63%, in Nov 2023.

He said: “I became a single parent when my daughter was seven, so I had to reduce my hours drastically to look after her.

“Beth had just lost her mum, so I was determined that she was not going to lose me to work.

“My wife, Jackie, had a 10-year battle with cancer. I wasn’t going to pay for someone else to look after my daughter after everything she had been through.

“Subconsciously I knew there was a problem. The house was on an interest-only mortgage, but I just put my head in the sand.

“In the back of my mind I was hoping that I could take a lump sum from my NHS pension and that would be enough. It wasn’t.

“When the letter arrived telling me the mortgage term was coming to an end I thought: Ok I really have to deal with this now, I cannot put it off any longer.

“I had a few sleepless nights. I had real worries about it. I didn’t want to relocate or downsize.

“It sounds silly, but I didn’t want to put the cat through it. I could have moved if I had to but Milly is 17-years-old and I didn’t want to move her.

“It’s fair to say I was quite apprehensive about equity release. I didn’t know the detail and I took a fair amount of convincing.

“Pure Retirement were extremely patient. They were very clear about the costs and the early repayment charges, which are on a sliding scale.

“The whole process took quite a long time because I was waiting for the rules to change so I could take a lump sum from my pension and continue working.

“I took £83,000 from my pension but I needed another £40,000 to clear the mortgage.

“I talked to my daughter about it. She’s 25 now and off living her life in London. She has a great career and will stand on her own two feet.

“You need to go into this with your eyes open, fully informed.

“I remember when I signed the dotted line I thought ‘this rate isn’t great’ but it was not wildly different to a traditional mortgage, rates are higher now.

“I’ve chosen to pay off the interest and a little bit of the capital. I chose to pay the maximum amount, which is £333 a month. The interest is not that much, but I can choose to stop, which is important.

“I’m quite happy doing three days a week at work for now, but my daughter is all in favour of me giving up altogether.”

Andrew Morris senior equity release adviser at Age Partnership said: ‘‘Although interest rates are higher now compared to few years ago, the ability to make repayments has given customers the confidence to release funds from their property.

“The flexibility around repayments, means that clients really are in control of the money that they borrow.

“Repayments can be as little as £50 and can be made ad hoc or on a regular basis. I always encourage my clients to repay any small amount that they can.’’

Mrs Kadir is a divorced and retired lady in her 70’s from Surrey, with grown up children and young grandchildren. One of her children had received funds from her to buy her first house and Mrs Kadir wanted to provide the same support to her other daughter. Her daughter dreamt of buying a home, along with land to develop her self-employed business venture in New Zealand which was going to be a micro bakery.  

The value of the Surrey property had increased to £1.7m, accumulating significant equity and so making equity release a viable choice. Mrs Kadir conducted extensive research independently and sought guidance from her financial adviser, Paul from Crabtree Later Life Mortgages Ltd to navigate the equity release process.  

In no time, Mrs Kadir had successfully secured £400k to gift to her daughter, a moment of immense joy for her. “My eyes were completely open and I understood the pay back and terms and conditions of equity release. My inheritance tax bill has also been reduced as I have been able to gift this money early, rather than after I die, so that is a positive result as well.”  

Having a good client and advisor relationship helped Mrs Kadir to lose any concerns or worries about taking out equity release. “I was very anxious about doing equity release because I’m not a borrower. Paul and Crabtree Later Life Mortgages Ltd were able to clarify how much I could borrow, simplify the paperwork and held my (virtual) hand throughout the whole process. It was like having a best friend who answered all questions patiently and with great understanding.”  

Mrs Kadir feels like she has the best of both worlds after taking out equity release. ‘I have the joy of helping my daughter start her new life in New Zealand, as well as the comfort of knowing I have my bricks and mortar home.” 

For more information about Crabtree Later Life Mortgages, please visit: https://www.crabtreellm.co.uk/ 

Mark Gregory, founder and CEO of the Equity Release Supermarket, reflects on 2023’s rates and considers what might be in store for 2024.

Equity release interest rates follow the trend of the 15-year gilt, rather than the Bank of England base rate. Gilts are UK government bonds, issued to help finance public spending. If gilts rise, equity release interest rates follow, and vice versa.

The table below highlights how the best product interest rates have changed during 2023, alongside gilt rates* for comparison.

Month	Best rate	15 year gilt
January	5.99%	3.71%
February	5.49%	4.07%
March	5.43%	3.78%
April	5.24%	4%
May	5.52%	4.44%
June	5.87%	4.53%
July	5.87%	4.50%
August	5.78%	4.58%
September	6%	4.75%
October	6%	4.84%
November	6.1%	4.51%
December	5.28%	3.97%

Equity release rates are expressed as monthly equivalent rates or MERs which shows the rate of interest added over the year but divided over every month.

As you can see, January 2023 started out at 5.99% with rates decreasing to 5.24% by April. With greater economic uncertainty interest rates and gilts increased for the rest of the year until this November, reaching 6.10%

In December we have started seeing a sharp decrease in both gilts and interest rates and the lowest rate is 5.28% and we hope this trend will continue in 2024.

Although average rates are currently above 6% there are many plans available below this. We are also seeing lenders increase their loan-to-values, meaning the amount that can be borrowed is also increasing.

Does the interest rate matter?

Yes of course. The rate will determine the interest that’s applied and if the customer chooses not to make any repayments, it will determine how much they can pass on to their beneficiaries when the plan ends.

But people should not assume that the product with the lowest rate is necessarily the right one for their personal circumstances. There are hundreds of equity release products on the market, each with different features.

Two of the most basic features are lump sum and drawdown plans.

As the term implies, a lump sum is where the customer takes out the equity in one go. However, if a customer takes out a drawdown plan they might pay a slightly higher interest rate but they only take out what they need at that time, with the option to drawdown more in the future, at the prevailing rate.

There are hundreds of great advisers listed in the Council’s member directory, including our own. People can also use our comparison tool, which helps them research the whole later life lending market, based on their personal circumstances.

For more information visit www.equityreleasesupermarket.com

*Source: Marketwatch.com – average 15-year gilts: January to December 2023

The views of contributors are not necessarily shared by the Council

Sue Read is a former equity release adviser with years of experience and now a compliance expert with the Equity Release Council. Watch the video to hear Sue answer some of the most frequently asked equity release questions.

 

Sue Read, the Council’s risk policy and compliance manager sets the record straight after a colourful portrayal of equity release in one of the UK’s most popular soap operas. 

Coronation Street went home from this year’s British Soap Awards with awards for Best Comedy Performance and Best Dramatic Performance, among a clutch of other accolades.

However, if ever there was an award for Most Accurate Depiction of a Financial Services Product, the soap wouldn’t even make the shortlist.

While Corrie’s plotline about an equity release scam is high on drama, thankfully it really is a complete work of fiction and could never happen in real life.

The story focuses on Stephen Reid who looks set to pocket the proceeds of an equity release plan he has taken out in his mother Audrey’s name.

But thanks to the Council’s standards it’s impossible to take out equity release without a face-to-face meeting between the customer and an independent solicitor, which is where the storyline crumbles.

That’s good news for older viewers, whose chances of a family member misusing equity release in this way are as unlikely as soap villain Stephen becoming our next Prime Minister.

Here’s what you need to know about why over 90,000 new and existing customers last year were able to use equity release safely and securely:

• For more than 30 years, all customers of equity release products which meet Equity Release Council standards have received independent legal advice before taking out a new plan.
• Today, this involves the homeowner receiving face-to-face legal advice as well as regulated financial advice, which explains their options and alternatives to equity release.
• We always encourage people to involve family or loved ones in their decision, but we recognise this isn’t always possible or appropriate (as Audrey might agree).
• Independent legal advice ensures customers are aware of the benefits and risks of equity release before they take out a plan.
• If a customer does not clearly understand the product or what they are doing, their case would not proceed and would be referred back to their financial adviser for further clarification and advice.
• Independent legal advice also ensures the customer has the capacity to decide whether or not to proceed with releasing equity, and – crucially – is not under duress or outside pressure or influence from a third party, which can include family members or even a partner in the event of a joint application.
• This is a unique safeguard that gives equity release customers greater protection than in the residential mortgage market, where independent legal advice is absent.
• Unlike financial advisers, solicitors are among the professions recognised under the Mental Capacity Act as having the necessary specialist training and expertise to assess capacity.

Protections like these make modern equity release a product that is trusted by thousands of homeowners every year to help boost their pensions, make repairs or improvements to their homes, refinance existing mortgages or gift money to family as a living inheritance.

That’s a less exciting reality for soap opera storylines, but a more comforting one for Corrie viewers and Britain’s older homeowners.

To find a regulated equity release adviser in your area and to find a plan that meets Equity Release Council standards, please use our find a member search.

“I originally heard about equity release from a friend who had used it. I needed to consolidate some existing debts and needed a new car to help with family transport arrangements. My only option was to do something with my property as I was potentially sitting on a lot of money and thought I could use that, rather than moving.

“I researched various organisations and chose an adviser with a professional, friendly approach and no deadline to sign. It was a weight off my mind knowing I don’t have to pay each month which then gave me free extra income. Having my own vehicle was a great relief.

“I have also been able to claim Council Tax benefit thanks to my adviser’s help – I had no idea I would be entitled to any benefits, but it was the first question she asked and she helped me to apply online at our meeting.

“If I’d not taken out an equity release plan, I probably would have had to downsize. This would have meant a flat and I didn’t like the idea of leasehold property or moving area. Equity release is personal and everybody’s situation is different, but I know I did the right thing. Taking out an equity release plan is the best thing I’ve ever done.”

This case study was supplied by SWR Equity release Services who also advised Sue on her equity release. The image is posed by a model. 

It was first published in the Council’s Anniversary Report in January 2022. To read the report please click here.

 

“We had paid off our original mortgage before moving into our present home and had no intention of obtaining another. However, the house we bought needed extensive renovations at significant cost.

“We were initially wary of equity release and consulted with a number of advisers before deciding to proceed. There was an extensive and thorough interview with our chosen firm, which required various evidence that we understood what we were undertaking. We were also interviewed by our solicitor who checked our competence and understanding of the product.

“We were very specific that we wanted to pay the interest monthly so that only the original sum borrowed would be left to pay when the house was sold at some time in the future. We have set up the monthly mortgage payments and are very happy with our dealings with all concerned. The equity release plan is quite a different product from our original impression.”

This case study was supplied by Birketts which provided the legal advice to Ann and Robin. The picture was posed by models.

It was first published in the Council’s Anniversary Report in January 2022. To read the report please click here.

“Although I had run my own veterinary pet food business for decades, I still didn’t have much of a pension. At my age, I wouldn’t have been able to take out a new mortgage, and I wanted to pay off the debt on my property so I could reduce my monthly outgoings.

“When I bought my semi-detached house in London in the 1970s, it was worth £32,000. I’m nearly 80 now and the property has grown in value to an amount that is much more than I need to live on.

“By taking money out of my estate now, I’ve been able to pay off my mortgage, boost my retirement income and help prevent my children from facing a hefty inheritance tax bill when I die. It’s meant I can stay in my family home, close to my children and they can have their inheritance when they need it the most.

“I researched equity release heavily before I made my decision. I weighed up the pros and cons and compared all the different equity release companies. Taking equity release really was the best option for me – the only other one would have been to move house and I didn’t want to do that. For both me and my family, equity release has proved to be the best choice we could have made.”

This case study was supplied by Key.

It was first published in the Council’s Anniversary Report in January 2022. To read the report please click here.

Kevin and Judith had an existing mortgage and were looking to borrow additional funds to purchase a static caravan. When completing the full equity release fact find, it became obvious they could actually achieve what they wanted on a standard repayment mortgage.

Many mainstream mortgage lenders were closed off to them as affordability considerations would limit the size of loan they could afford to service beyond the point of reaching state pension age. Others had maximum age limits which ruled them out of the equation, while the presence of recent and historic instances of adverse credit on their report further restricted their options.

After exploring various options, Kevin and Judith’s adviser was able to identify a lender who would consider adverse credit as well as allowing a mortgage term that would extend into retirement. Having secured a repayment mortgage, both Kevin and Judith were happy with this outcome. They are both relatively young and could demonstrably service the interest on their loan.

Deferring the decision to use equity release means, should they need this option in the future, they will have the benefit of having more equity to draw on as a result.

This case study was supplied by Probity Mortgage Services. The picture is posed by models.

It first published in the Council’s Anniversary Report in January 2022. To read the report please click here.

Ruth turned to equity release in her late eighties, when she was in poor physical health and had for some time employed an agency carer at home, which was a cost she was funding privately.

This had taken its toll upon Ruth’s savings to the point that her family were concerned that the arrangement would need to end. It was crucially important to Ruth that she be allowed to remain in her own home and her family felt it would have a detrimental effect upon her health if she moved into an assisted living placement or a care home.

Having discussed alternatives such as family assistance, Ruth opted for a drawdown lifetime mortgage where the initial withdrawal was sufficient to meet her care costs for the next 12 months. Given her age and the relatively low initial sum that was released, she was able to secure an interest rate of 2.50% (in 2021) and agree a sizable reserve fund because additional funds may be required to meet ongoing care costs in future years.

The equity release plan has given Ruth the comfort and peace of mind of knowing that her care at home may continue indefinitely.

This case study was supplied by Bower. The picture is posed by models.

It first published in the Council’s Anniversary Report in January 2022. To read the report please click here.