Great news for older homeowners who may be feeling the pinch in today’s bitter economic climate: The latest research from Halifax shows that the equity value of the UK’s private housing stock at the end of 2011 is estimated at £3.9 trillion, up from £2.1 trillion in 2001 – that’s a healthy overall 84% increase over ten years to 2011.

The value of the UK private residential housing stock has grown at more than twice the rate of increase in overall consumer prices, with the retail price index up by 38% over the past ten years.

For most homeowners, housing is still very much the main store of private wealth and it is this wealth that can be successfully accessed using equity release products. Little wonder then that older homeowners are looking closely at these assets when planning for retirement.

The research noted that over the past five years the value of the UK’s housing stock has declined by 5%. This reflects the reduction in house prices since autumn 2007: a decline that is nonetheless more than compensated for by the significant increases in the half decade prior to 2007.

Whilst the value of housing stock has soared during the past decade, so has the total value of outstanding mortgage balances, which have more than doubled (111%). The £1.8 trillion increase in the value of housing assets, however, outstripped the £655 billion rise in mortgage debt between 2001 and 2011.

As a result, housing equity – the value of housing assets less the total value of outstanding mortgage balances – has increased by £1.1 trillion from £1.5 trillion in 2001 to £2.6 trillion in 2011.

All 12 regions of the UK have seen a significant increase in the value of their private housing stock during the last ten years.

The biggest rise was in Scotland where there was a 131% increase (from £113.5bn in 2001 to £262.6bn in 2011), followed by the north with a rise of 102% (from £50.5bn to £101.8bn). In Yorkshire and the Humber housing value has almost doubled to £236bn from £119bn in 2001 (98%). The smallest increases were in the South East (68%) and the West Midlands (71%).

Should you be considering using an equity release product to access the value built up in your home, you would be wise to contact a specialist independent financial adviser who can guide you through the products available and also offer you advice on your own individual circumstances. There are also specialist equity release solicitors who will happily help you with any legal queries.

If you are researching equity release then why not check out the Financial Services Authority (FSA) website to see what they say? You could also take a look at SHIP, the industry body which represents the leading providers of equity release.

Source: Halifax

It looks as though there might be new moves by equity release providers to bring more flexible equity release products to the UK market within the next two years.

At least that’s what Jon King, managing director of More 2 Life thinks. He says: “The equity release sector has to embrace change and develop products that are better suited to people’s needs. Prosperity in the future of equity release depends on innovation. The growth of this market over the past few years has been driven by innovation and we do need more. The market is currently restricted by a lack of funding but I’d expect to see products like this in the next year to two years.

He sees shorter term equity release of around five years as a future product, allowing retired borrowers the chance to release a lump of cash for a short time and then repay when they downsize. The equity release lender also claims borrowers will be given the ability to service interest payments monthly rather than rolling it up with the capital, within the same time-frame.

At the moment early repayment charges on equity release loans mean providers can lack flexibility to innovate. But King believes retired borrowers releasing equity from their homes should be given the opportunity to choose to service the interest payments.

There’s an awful lot of folk coming up to retirement age who are going to need all the flexibility they can get. Let’s hope the providers deliver!

Source: Mortgage Introducer

There’s no doubt that equity release is a viable and safe means of getting your hands on some real cash without having to sell your home. In fact, in the last year alone, around 20,000 older homeowners have successfully used an equity release product to raise the money they wanted.

However, to release equity on property is not right for everyone. Why? Because every individual homeowner has their own unique set of circumstances that need to be taken into account.

Here are a few questions you might like to answer as you research equity release – they’ll also help when you talk to an independent financial adviser:

Q. Where is the property?

Q. What is the value of your property?

Q. The type of property – house / bungalow / manor?

Q. The state of the property – is it in good repair?

Q. Is it fully insured?

Q. Is there still a mortgage outstanding?

Q. How many people live in the property?

Q. Are you male or female?

Q. How old are you?

Q. How old is your partner?

Q. What is your health like – do you smoke?

Q. How is your partner’s health?

Q. Do you or your partner have a disability or a debilitating sickness?

Q. Do you or your partner claim any State benefits?

Q. What do you think will happen to house prices in the future?

Q. How much money do you want to raise?

Q. What do you intend to do with the money?

Q. What percentage (if any) of the value of your home do you wish to retain?

Q. Do you have outstanding debts – exactly how much?

Q. Do your children know that you intend to release equity from the family home?

Q. What provision (if any) do you want to make for your heirs?

Q. How long do you think you might live?

And, here’s a list of things for you to check out:

• Talk to your family – they may suggest alternatives to equity release.

• Check your entitlement to grants – if you are thinking about using equity release to pay for home improvements, you may very well be able to claim on certain grants from your local council or help from organisations like Houseproud.

• If you only need to raise a small amount of money, research a loan – there are cheaper ways than using equity release.

• Equity release products are not right for short term borrowing; they are designed to run for the rest of your life.

• Check your entitlement to benefits – if you want to use equity release to boost your lifestyle, check first that you are receiving all the State benefits and support you might be entitled to.

• By releasing equity from your property there will be a reduction in the value of your estate and the entitlement for your heirs is reduced.

• Think about using your savings instead of releasing equity; the cost of equity release will exceed any interest you can expect to earn from savings.

• Move to a smaller house – this could be a less expensive way of releasing capital and may also reduce your outgoings each month.

Above all, don’t leave things to chance. Always talk through your options with an independent financial adviser who specialises in equity release. And, you’ll probably need a solicitor who knows the ins-and-outs of equity release to advise you accordingly in your own special circumstances.

The general public are beginning to accept the fact that equity release can be a very useful tool when planning for their retirement.

The latest figures released by SHIP (Safe Home Income Plans) show a marked increase in the number of older homeowners using equity release. In the last quarter of 2011 alone, 4,399 households successfully released equity from their properties – up from the 4,048 in the July-September quarter.

The total cash payouts amounted to £215.9m – up from the £206.2m in the previous quarter.

Ask your IFA to explain equity release

It’s becoming a well known fact that many older homeowners do have a need for equity release but they have little knowledge of what is available to them. That’s where talking to an IFA is so useful – they can help you understand all the points about the various forms of equity release and how they apply to your own particular circumstances.

Source: SHIP

Each and every equity release customer is different and chooses to release equity from their homes for a variety of reasons. Indeed, according to the industry body SHIP (Safe Home Income Plans), the typical amount released of £48,952 is used to provide the solution to a variety of different financial problems and to fund a number of different goals.

Here are some of the more common uses for funds released via equity release schemes:

Upgrading their environment: Home and / or garden improvements is how over half of equity release customers spend all or some of the money they receive. This can cover everything from installing double glazing to building an extension to making their homes more accessible.

Freeing up income: Debt or mortgage repayment is also a popular choice as this offers peace of mind and frees up their income to cover other expenses. In addition, 16% use this to help meet regular bills which allows them to make their pension income go further.

Upgrading retirement lifestyle: For others, travel is a priority in retirement – be it a cruise of a lifetime or something simpler like the opportunity to visit family and friends in other countries.

Inter-generational support: University fees, high house prices and significant inflation are hitting today’s younger generation so it’s not surprising that 23% of equity release customers use their payout to help their family. In addition, after many years of house price increases, 1% use it to reduce their IHT (inheritance Tax) liability.

Popular uses for equity release

• 59% Home and / or garden improvements
• 31% Pay debts (e.g. loans, credit cards)
• 30% Go on holiday
• 23% Treat or help family and friends
• 20% Clear outstanding mortgage
• 16% Help with regular bills
• 1% Reduce inheritance tax liability

Source:           Latest SHIP 2011 Report

Since equity release trade body SHIP was formed in 1991, members provided 270,000 plans to the UK over-50s, releasing £12.12 billion pounds!

More to come on this…

“Whilst house prices in the UK have been largely unchanged in recent months, there have been significant differences in performance in towns across the country,” says Martin Ellis, housing economist at Halifax.

“The two towns recording the biggest rises are both within easy commuting distance of major commercial centres. In contrast, the majority of towns that have fared worst in house price terms are outside southern England where economic conditions have tended to be less favourable.”

The Downs

According to new research by Halifax, Kettering in Northamptonshire and Dunfermline, Fife in Scotland experienced the largest falls in average selling prices in 2011, both recording declines of 15%.

Nine of the ten towns that saw the biggest declines in property values were outside southern England, reflecting the generally weaker performance of the housing market outside the south.

Scotland recorded a very mixed performance with two towns in the top ten – Falkirk and Inverness – and two in the bottom ten – Dunfermline and Ayr.

The Ups

Woking in Surrey recorded the biggest rise in house prices among major UK towns and cities in 2011. And, based on Halifax’s own house price data, the average selling price in Woking was 16% higher than in the previous year, increasing from £257,590 in 2010 to £299,654 in 2011.

Falkirk in Scotland experienced the second biggest rise in house prices with a 12% gain. Like Woking, Falkirk is within easy commuting distance of major commercial centres. It lies almost equidistant between Edinburgh and Glasgow.

Towns in London and the South East accounted for nine of the 20 towns recording the strongest price rises in 2011. Overall, 28% of the towns surveyed saw some increase in prices over the year.

Worries Persist

Martin Ellis continued, “Uncertainty around the economy is unusually high as we go into the New Year. This makes it especially difficult to predict the course of house prices over the next 12 months. Overall, we expect broad stability in house prices nationally during 2012. Nonetheless, we expect some variation in house price movements across the country.

“Prices are likely to be strongest in London and the South East as these regions perform better economically. House prices outside southern England are expected to be constrained by these areas’ generally weaker economic performance and their greater dependence on public sector employment.”

Could Equity Release Help

Where older people are looking to use the value of their homes to raise money to bolster their retirement, there are equity release solutions available. The equity in a property is the difference between its value and any mortgage or other debts held against it.

Equity release is the name given to making available some, or all, of the value in your home whilst continuing to live in it for as long as you live. Safe equity release schemes are available from FSA regulated and SHIP member providers, either as a home reversion plan or a lifetime mortgage.

Sources: Halifax | Mortgage Introducer Magazine | SHIP | FSA

People in the UK are risking financial shock in retirement because many don’t think they need to save for the costs of care in old age. They may, however, find the value in their homes useful if they need to use equity release finance to fund their future care.  

The international Bupa Health Pulse study, which surveyed more than 13,000 people in 12 countries, found that less than a third (30%) of Brits think they will need to put money aside in the future to fund their care in later life, the lowest of all countries polled.

Only a third (33%) of the over 65s in the UK said that they had saved money for their old age at all. China and Thailand topped the table as the countries most likely to have saved for later life.

Commenting, Oliver Thomas, UK director, Bupa Care Homes, said: “We know that on average, someone over 65 is likely to need around £50,000 to cover care costs such as home adaptations, meals on wheels and care home fees, but one in 10 will need double that.

The NHS won’t cover care

“Most people assume all care in old age is covered by the NHS, but it’s not, so paying for care can come as a big shock,” continued Mr Thomas.

The survey also found that 28% of Brits claim that they’re just planning to deal with the consequences of old age as and when it happens.

Women are most concerned

In the majority of countries surveyed, women were found to be significantly less likely than men to have put money aside for old age. Thomas continued: “Because women live longer, they are more likely to need social care than men. We need to celebrate the fact that people are living longer but we’d urge people, particularly women, to talk to relatives and loved ones about saving for old age.

“21% of British women are worried about who will look after them when they get old, but only 13% of British men share this worry. The majority of people (70%) in Bupa’s Care Homes in the UK are women and a significant number of admissions are unplanned, meaning that many are forced to arrange finance at what is already a stressful time.”

Baroness Pitkeathley, vice president, Carers UK, http://www.carersuk.org said: “The majority of enquiries to Carers UK’s helpline come from women, either women seeking advice about their spouse who needs care, or sisters, daughters or nieces who look after a family member. “Like Bupa, we’d urge people to talk more about what care they might want for themselves in old age so, if and when the time comes, their family know their preferences for care.”

Equity release can help

16% of the over 65s in the UK – roughly 1.6 million people – think they may need to use equity release at some point, either a home reversion or a lifetime mortgage, or they may possibly have to sell their house to fund care in their old age.

Professional advice is a must

When considering any equity release products to fund care in the future, advice should be sought from an independent financial adviser who is FSA-registered and qualified to advise on equity release. Your personal circumstances, savings, any state benefits and family needs will be taken into account and you will be advised on the best possible route to take on releasing equity from your property. And for your family’s sake you may like to talk to a specialist equity release solicitor – they can help steer you through the legal aspects of equity release finance and also help you to deal with your wishes for your estate. Or, you can check to see what else is available to you via other agencies.

Sources:

• Bupa
• Mortgage Introducer Magazine

In today’s volatile world, many pensioners are considering ways and means of funding their retirement and living the kind of life they had always planned. Equity release is a proficient and safe way for older homeowners to obtain some much-needed funds, quickly. However it is wise to look carefully into the state benefits you may be owed before releasing any equity against your home.

Make sure you claim

Two and a half million pensioners (1 in 5) in the UK today are living below the poverty line* but many still fail to claim the benefits they are owed. And an estimated £4.6 billion goes unclaimed by pensioners each year**.

The State Pensions

The basic State Pension is paid by the Department of Work and Pensions (DWP) to people who are currently aged 60 for women and 65 for men (this is going up soon, so remember to check). Qualification for the pension depends on the individual’s national insurance contribution (NIC) history.  If you have not met the NIC criteria, you may not receive a pension, or may have to accept a reduced one. On top of the basic pension you may also be eligible to get some additional capital based on your earnings. Some married women may also be able to claim a widow’s pension.

Pension Credit

This is for people over the age of 60 and has two elements to it. The first is the Guarantee Credit which is means tested and is paid if the income of the applicant is below a certain amount. Anyone who qualifies for the Guarantee Credit is also entitled to full Council Tax Benefit and Housing Benefit.

The second element is Savings Credit. You can become eligible for this once you reach the age of 65. This provides additional monetary benefits for those who saved for their pension during their working life. It is supposed to act as a ‘reward’ for those who practised retirement planning.

Some individuals may receive more Pension Credit if they are disabled or a carer, for example.

The Social Fund

Although there are sometimes exceptions, the Social Fund is only generally paid to those who receive Pension Credit. This fund is there to provide lump sum payments, grants and loans to help cover the cost of extra expenses that cannot be covered by the individual’s regular income.

Council Tax Rebates

Many pensioners are entitled to money off their council tax. The Council Tax Benefit scheme is a national welfare benefit scheme that helps people on a low income cover the cost of the council tax for their home. People receiving the Pension Credit Guarantee Credit should have their Council Tax paid for them, although there are exceptions to this rule. You may also be entitled to some financial help if your income and savings are below £16,000.

Attendance Allowance

Attendance Allowance (AA) is a tax-free benefit for people aged 65 or over who need help with personal care due to a physical, sensory or mental disability. They help to cover the extra costs of illness. These benefits are not means tested and so are not affected by how much other income or savings you have. They will also not affect any of the other benefits you are receiving or qualify for. You also don’t need to be getting help when you apply; it is based on what help you are assessed as requiring and not the actual help you receive. Each application is assessed individually and so is tailored to the individual’s disability and needs.

Winter Fuel Payments and help with heating

Winter Fuel Payments is an annual payment and is made to those aged 60 or over to help cover the costs of keeping warm during the winter. This is not taxed. Payments are usually made automatically, but some people may need to make a claim.

There are two other types of heating benefits. The first is a Warm Front Grant which can be put towards the cost of central heating, insulation, repairs and new boilers. This is means tested and so financial situations will need to be divulged. The second is the Cold Weather Payments. These are only given to those who receive Pension Credit and they provide some extra funding if we go through a period of especially cold weather.

Health costs

Everyone in the UK over 60 receives free eye tests and free prescriptions. You may also be entitled to some funds for dental treatment, hospital travel costs etc if your savings amount to less than £16,000. Those who receive the Pension Credit Guarantee Credit should receive all these at no cost to them.

Home repairs and alterations

If you receive Pension Credit you may also be able to receive a Community Care Grant to help with home repairs and alterations. Local authorities also have Disabled Facilities Grants which can be used to adapt your home if you have a disability. If you are not eligible for these grants then there are local housing charities that may be able to help.

Television Licences

These are free for households with a person aged 75 or over living there. Those who are registered blind can receive a 50% reduction and there is also a £5 concessionary licence for those living in a care home or sheltered accommodation.

It doesn’t stop there

As well as Government funded benefits, over 60s can save money by taking advantage of the free off-peak travel, as well as reduced or free ticket prices for most attractions.

There are many benefits out there for pensioners, including some which entitle the individual to a significant sum of money, and it is for this reason that older homeowners should look into their benefit options before moving forward with equity release.

It would also be good to get a benefit check carried out by a free advice agency such as your local Citizens Advice Bureau and/or talk to your local council. They should not only be able to tell you what benefits you qualify for, they should also be able to help you with the application process.

Get professional advice

If you are looking to find funds to support you in your retirement, releasing equity from your property, together with home equity release schemes, are possible avenues to consider. Advice should be sought from an FSA-registered professional independent financial adviser who is qualified to advise on equity release, as personal circumstances will affect how much any individual will receive and what they qualify for. You may also want to consider talking to a specialist equity release solicitor – especially where you wish to leave part of your estate to your children.

* Department of Work and Pensions 2011