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Analysis: Dispel those equity release fallacies


We often hear that equity release is becoming more mainstream but there are stubborn misconceptions. The prevailing one – that all equity is surrendered when an equity release product is taken – can be overturned by some simple facts.

According to the Equity Release Market Report (Spring 2015), the drawdown lifetime mortgage remains the most popular product, making up two-thirds of completed plans. On average, those taking out such a mortgage released just 15.8 per cent of their available total.

The second-most popular product, the lump sum lifetime mortgage, makes up the majority of other new plans. When customers used it, on average only 28.1 per cent of equity was released.

Throughout the market, most customers release less than a third of their total equity. So on average at least, customers always retain some equity. For example, a lump sum customer who releases £70,000 from their £245,000 property at an interest rate of 6.49 per cent would not see their loan exceed their property value for 30 years, as long as property prices maintained a 2 per cent rise per annum. Even if house prices were to crash, the no negative equity guarantee provides further protection.


Mark Graves Pink 2015

Lenders should make IP an ‘essential part of taking out a mortgage’

Lenders should insist that borrowers have protection in place to ensure they can continue to pay their mortgage if they become unable to work because of illness, say experts. Presently, the Bank of England’s Financial Policy Committee insists that lenders check to ensure borrowers can withstand an increase in interest rates. But Pink director Mark […]


L&C’s Mark Searle joins Chartwell Funding as sales director

Former London & Country head of peripheral products Mark Searle has joined Bristol-based brokerage Chartwell Funding as its sales director. Searle joined L&C in 2002 as a mortgage and protection adviser and has spent the past four years in charge of general insurance and solicitor referrals for the broker. Chartwell Funding managing director Robert Winfield […]


CML launches statement of practice for B2L

The Council of Mortgage Lenders has published a statement of best practice for non-regulated buy-to-let business to ensure that lending is both “responsible and clearly understood”. The trade body says 31 of its members have signed up to the principles, comprising 90 per cent of the market, and any other member operating in buy-to-let will […]


Help to Buy 2 deposits reach 10-month high

The average deposit for house purchases using the Help to Buy mortgage guarantee scheme reached a 10-month high in February, according to Mortgage Advice Bureau. Buyers using the scheme in February put forward an average deposit of £9,936, up 9.2 per cent from £9,099 in January. It meant the average Help to Buy 2 deposit […]


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