George Osborne’s much awaited first budget delivered plenty that affects most of the population, but how much of this will affect those considering equity release?
VAT - The biggest headline is the increase in VAT from 17.5% to 20% effective from January 2011. This will affect everyone but arguably pensioners on a fixed income will be hit harder than most.
Pensions - Better news for pensioners is that the basic state pension will be linked to earnings from April 2011, with the pension guaranteed to rise in line with earnings, prices or 2.5%, whichever is the greater.
Council Tax – You may be fortunate enough to benefit from a freeze in your Council Tax bill. Councils which propose low council tax increases will be offered extra funds to allow them to freeze the tax for one year from April 2011.
Bank Levy - A less obvious impact may come from the new banking levy which comes into effect from January 2011. This could increase the cost of equity release.
Angela Knight, chief executive of the British Bankers' Association, said: "The impact of increasing operating costs on banks is the same as with any other company in that it affects the price of their goods and products, which in our case is finance. This in turn flows through to the wider economy as well."
Comment – The increase in VAT and the possibility of equity release becoming more expensive are just two more reasons why retired homeowners are turning to equity release to supplement their pension income.
Increasing house prices, although not yet back to their 2007 high, are improving the amounts available.
David Wright
Managing Director
Sixty Plus – The Equity Release Specialist
22 June 2010
