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Property takes a prime spot for retirement plans

Advisers should now be including property assets alongside pension pots when talking about retirement


A dramatic shake-up of the pensions market, brought about by the recent Budget changes, means that record numbers of homeowners are releasing equity from their property through lifetime mortgages.

Recent figures from the Equity Release Council show that in the last two years the equity release market has grown by 36 per cent and this figure is still climbing.   

The retirement market has witnessed an overhaul of products available on the market that provide financial solutions. With people living longer and in a climate where pensions have not met their expectations, homeowners need to look at alternatives to ensure that they remain financially secure during retirement and a lifetime mortgage could be the solution. 

A lifetime mortgage allows a homeowner to release cash from their property without needing to move home or lose ownership.

The market has been transformed over the last decade, with lenders offering more innovative and flexible products. 

They are regulated by the Financial Conduct Authority and can also be endorsed by the Equity Release Council which insists upon product safeguards which protect the customer.

All of this means that the customer is more protected than ever before and has a much wider range of product choice.

Reports show that people are carrying more debt into retirement and demand for a lifetime mortgage will continue to increase as mainstream lenders restrict their lending criteria further. 

This means older borrowers with a mortgage shortfall are being left with fewer options.

The FCA’s thematic review into interest-only mortgages revealed there were over two-and-a-half million interest-only mortgages due for repayment by 2041. As many as 48 per cent of these face a shortfall at repayment day of around £71,000 and 260,000 of these borrowers have no repayment plan in place.  

At Stonehaven, 45 per cent of customers are using the equity they release from their home to clear their existing mortgage.

The uses for lifetime mortgages are also evolving.

Along with using the money for making home improvements or buying a new property, cash can also be raised to gift to children or grandchildren. 

With the average first-time buyer now needing to save a deposit of £29,400 to get on the property ladder, gifting the money to them through a lifetime mortgage means that older homeowners are able to help their families when they need it.

The impact of inheritance tax could also be reduced by doing this.

Alongside these increased uses, growth is also likely to come from financial advisers who should now be including property assets alongside pension pots when giving advice on retirement.

A property is usually the biggest asset someone has, and releasing equity from their homes should be considered for efficient retirement planning when looking at their portfolio.

With record numbers of people taking out life time mortgages and with radical changes in pensions, equity release is not just set to be the next big thing, the signs are that it is already here.


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