It seems impossible to turn on the TV or radio without hearing of doom and gloom of the credit crunch, falling house prices, rising unemployment and ailing banks.
So, how has this affected Equity Release?
Perhaps less than you might imagine.
All of the major Equity Release providers are still very much around. Whilst a few companies have withdrawn from the market, it is fair to say they were minor players anyway.
Most Equity Release plans are lifetime mortgages and here we have seen little impact. You can release pretty much the same percentages as before.
Although the Equity Release sector appears to be more resilient than the mainstream mortgage market, the credit crunch is certainly affecting people’s outlook.
It seems that some people are standing still, even it they’re not quite sure why. The constant bad news makes them uncertain. Uncertainty breeds inactivity.
Is this the right approach?
Perhaps not. With the cost of living ever rising, the need for equity release is greater than ever.
Drawdown plans
Our typical client uses Equity Release to provide a certain amount for today with a drawdown facility they can call upon in the future.
For example -
In 2007, Mrs Jones was 70 years old and wanted £30,000 from Equity Release plus the facility to release more if she wants to in the future. Her house was worth £300,000.
She could have released the £30,000 and have a further £60,000 to drawdown in the future as and when she chooses.
Now in 2009, having delayed taking Equity Release her house is worth £250,000 and she is 72.
She can still release her £30,000 but the drawdown facility has reduced to £50,000.
So the total amount available to her has reduced from £90,000 to £80,000 – this makes no difference to her current plans – she can still have the £30,000 she needs now with the facility for plenty of extra money for the future.
David Wright, Sixty Plus – david@sixtyplusonline.co.uk
1 April 2009
