Equity release schemes - 12.09.05

UK Mortgage News

With most older people sitting on a goldmine, if the rise in property prices over the last ten years is anything to go by, it comes as no surprise that they are cashing in on their good fortune. The value of the average house in 1973 was £10,000, today it is almost £173,000. For amost all people over 65, their property represents 75% of all of their wealth.

Equity release schemes were set up to allow home owners the opportunity to release funds. Once only offered by a few specialist companies, the schemes have been adopted by almost all big unsurers, banks and building societies. The Prudential who have recently entered the market say that last year older homeowners turned £1.2billion of property value into cash compared to a 2002 figure of £655 million. There are angles to look at when deciding whether to release funds and one of the more important one is the effect it could have on state benefit entitlements, it is not necessarily recommended for people 65 or under and some lenders are looking at offering mortgages to borrowers who have or who are near retirement age, the mortgages being based on interest only payments with those able to cover the cost of the repayments through their pension or other income.

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