Harold Pritchard, Distribution Director, Legal & General Home Finance
How do you make lifetime mortgages work for families?
Housing wealth amongst the over 55s has grown. In London and the South East in particular, house price rises have helped homeowners to accumulate large chunks of equity. Britain’s last-time buyers, homeowners aged over 55, hold £1 trillion of housing wealth. For some people approaching or in retirement, there will now be more wealth in their home than in their pension pot.
As a result, property wealth conversations are becoming more common in retirement planning. They are no longer limited to clients who are downsizing, or buy-to-let landlords. Lifetime mortgages are a way to release equity and fund their retirement goals. For some, these goals are not only personal – but for their families too.
Why are families important?
Families are often a big part of the client’s motivation for taking a lifetime mortgage. They can also be a major influencer if they have any concerns about taking the step to release equity.
For many clients, taking a lifetime mortgage will enable them to do the things they’ve always wanted. Whether that’s exotic holidays, home improvements or lunches with friends.
For others, a major driver in making that decision will be the potential to help their families. Clients could use the money released from their home to:
- Help raise the deposit for a grandchild to buy their first home
- Enable a couple to stay living together by paying for home adaptations or care
- Support a separating couple in a divorce settlement
- Boost a grandparent’s income so that they can afford to visit relatives living abroad
Myths and the influence of family members
We’ve come a long way from the equity release products of the 1980s. Product innovation, combined with increased competition in the market, has meant a better deal and more choice than ever for consumers. Interest rates are much lower than in the 1980s and product developments have given homeowners greater flexibility in repaying the loan or managing the interest payments.
These improvements have undoubtedly contributed to the market’s growth. In 2018, lending increased to £3.94 billion and analysis predicts that this figure will reach £8.4 billion by 2021.
Yet research shows that some negative perceptions and myths about equity release prevail. Lenders need to work with advisers to promote the varied benefits offered by lifetime mortgages. Families can be brought closer, made financially stronger and achieve goals that would otherwise remain out of reach. Part of this task will be tackling the myths that can often create resistance to that opportunity.
Over the coming months we’ll be developing new case studies and articles to help advisers tackle some of these misconceptions so they can support their clients’ families. Visit www.legalandgeneral.com/adviser/ltm to find out more information and keep an eye out for our upcoming webinar on the role lifetime mortgages could play in a later life divorce.
(Please note the views of our contributors are theirs and not necessarily those of the Council)
