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Legal & General Equity Release – Visionary Views & Sea Change Needed

Wednesday, October 14th, 2015

Legal and General Equity releaseThe equity release marketplace in 2015 has been undergoing a period of growth and innovation which has been long overdue. There are major factors influencing this potential golden generation of competitive equity release plans. Helping matters has been a new big brand household name – Legal & General who are aiming to take a large share of equity release business, but not necessarily in the conventional manner.

 

Realising the lifetime mortgage market needs a sea change in order to reach the heady predictions made, Legal & General are almost starting with a blank canvas & fresh approach to how equity release UK plans are marketed & advised. These ideas I’m sure will soon be rolled-out to the equity release broker community, who need to awaken to the concept of change, not much of which has really been seen over the past few years.

 

Personally, equity release brokers & lenders need a complete overhaul of its thinking & messages it needs to portray to the consumer to build confidence. Conventionality needs to be erased & brought into the 21st century using the latest of technology & wider distribution. This shouldn’t be just by one or two brokers strangling the marketplace, effectively restricting the entry of new lenders/funders, but an across the board approach by everyone (brokers & providers) working together.

 

Furthermore, for growth, new advisers are needed to be brought in from outside the industry & trained to meet the rigorous measures imposed by the Equity Release Council to ensure safe route to market for the consumer. There is a shortage of quality equity release advisers which needs immediately addressing, otherwise how can the market grow?

 

Legal and General Home Finance ‘Sea Change’

Let’s analyse what Legal and General Home Finance have achieved since entering the equity release arena by acquiring NewLife Mortgages in early 2015. They have provided a series of plans which have effectively matched the best crop of products in the market at entry point. Features such as the 10% voluntary repayment option, lowest interest rate, high loan-to-value products & inheritance protection facility have competed significantly well against its peers, such as Aviva Equity Release.

 

Understandably Legal and General had to start somewhere & their efforts so far are commendable. With product research underway & their own analysis of how the market should look moving forward, we welcome a fresh voice & innovative product development. With electronic applications & valuation instructions to commence in the New Year, these are exciting times for the industry, but not before time. Branding themselves as Legal & General Home Finance indicates their proposition will be more diverse than just traditional equity release plans.

 

Areas where development is needed is greater flexibility for all pre & post retirement homeowners and remedying the issues for the over 55’s sensibly borrowing into retirement which MMR has stunted. We have seen how the Marsden Retirement Mortgage has filled a niche in post lending advice & this gap between equity release schemes & residential mortgages is a void that needs consideration. Equity release plans in their current state, albeit the most flexible ever, will not meet the future needs & demands for all retirees. New ideas and new forms of retirement mortgages are needed, but maybe one’s that somehow interact with lifetime mortgages, switching between as the homeowner’s future circumstances dictate.

 

 

Can Legal & General Exert Influence?

There is a vision for the expected growth in post-retirement lending, which some market analysts have projected could reach £5billion by 2020! This is still a mere drop in the ocean compared to the residential mortgage market of over £200 billion, yet there is still almost £1 trillion in untapped equity remaining in the over 55’s property portfolio’s. Is the figure even realistic? Not in its current format & lenders thought process. This is why Legal & General’s introduction could be what the market needs.

 

We are aware of the history of equity release schemes, resulting in the lack of confidence with many retirees & press alike. However with the efforts from Nigel Waterson from the Equity Release Council & the voice of important members of the equity release sector such as Andrea Rosario, the market is starting to answer back. In essence, the external adverse publicity maybe due to lack of knowledge of equity release and of how the newer breed of lifetime mortgage schemes work in practice & how it’s strictly regulated by the FCA. But this is where the equity release industry has plotted its own downfall. Lenders themselves should stand up more & be accountable, especially when adverse publicity arises, as it tends to be the market correspondents alone who respond.

 

Frustration ensues when column inches and comments about equity release are misconstrued. But that will happen when the market is so inhibited by a few brokers who have their own interests at heart. We already have an ‘equity release club’ in the industry, but designed for brokers for equity release referral purposes. Equity release brokers themselves should form their own ‘club’, thus joining forces and work out they can ALL assist the growth in the equity release sector. A new era of consumer openness and transparency needs to develop so there is a clear voice representing the industry, with a collective approach from ALL, not just the monopoly of a few.

 

A Sea-Change of attitude, products, innovation and lenders is what’s required for equity release & retirement lending as a whole, to progress. At least one of these requirements seems to have been met, with the household name of Legal and General becoming a new lifetime mortgage provider. The next 12 months may define the future of this industry. These could be exciting times for all those involved from brokers through to lenders, but not forgetting the true beneficiaries to all this – homeowners over the age of 55 who genuinely need a mortgage vehicle to enhance their retirement!

 

For further information on the range of Legal & General equity release schemes, please contact Mark Gregory – mark@equityreleasesupermarket.co.uk or call 07966 889597.

Before Using Equity Release Club Together All Available Savings and Benefits

Thursday, June 27th, 2013

Experience has shown that equity release should always be considered a lifetime mortgage of last resort.

 

With the popularity of equity release schemes reaching an all time high, now is a good time to take stock of just why the equity release market has reached the level of consumer confidence it now commands.

 

There have been many highs & lows for an industry which has been much maligned. However, with increasingly flexible schemes & the lowest interest rates ever seen, we could be in for a ‘golden age’ for equity release.

 

It is therefore essential to seek the services of a qualified professional equity release adviser who is able to club together all their resources and ‘know how’ to complete a full fact find assessment of the clients situation.

 

This will include the ‘hard facts’ such as income, savings & assets etc which determine one’s current financial predicament. However, just as important are the ‘softer facts’ which mould a customer’s future viewpoint such as interest rates, property values and their potential inheritance.

 

Armed with this information, you should find an equity release adviser would assess whether a clients objectives could be met by alternative solutions, prior to an equity release recommendation being made.

 

Equity release alternatives  

When releasing equity from your home it involves a number of risks. Therefore, it is important that before your equity release adviser makes any recommendations, full consideration are given to whether there are any other options that could be explored.

 

Equity Release Supermarket will always discuss the following alternatives as a pre cursor to any equity release recommendation. Typically, these are:

 

  1. Apply for benefits – if your retirement income is below minimum government standards, then you may qualify for means tested benefits. These would include pension credit, savings credit and council tax benefit. For tax year 2013/14 the minimum income level to qualify for is £145.40pw for a single person and £222.05 for a couple. Therefore, if retirement incomes fall below these figures then you should be making enquiries at the DWP and your local authority. Remember that taking equity release from your property can affect means tested benefits, so always get professional advice.
  2. Obtain a grant for home improvements – again, if your income is below government guidelines then there are certain grants that are available upon enquiry. The standard grants can include loft insulation, cavity wall insulation, new boiler and by contacting your local Home Improvement Agency (HIA) they could provide assistance to help repair or even adapt your home. Therefore, these should always be explored before taking a home equity plan.
  3. Downsizing – i.e. moving to a smaller, less expensive property – probably the most common & cost effective solution, rather than taking equity from your property. Sometimes an emotive issue, as most retirees have lived in their current abode for many years, often with many memories attached. However, with the children moving on, your property may become too large to maintain. Therefore, by downsizing to a smaller property you can release equity that can then be used for the purposes you require & support you financially into your retirement.
  4. Using other assets to provide the funding required – taking equity release involves the expense of compound interest & an interest rate charged that would be higher than that received in most investments & savings accounts. Therefore, why take equity release, when you may have considerable savings you could use instead? Nevertheless, bear in mind some investments may be used for income purposes, so need to be left in situ & there should always be an emergency fund on hand should anything untoward occur & funds required immediately. Some people even feel the necessity for a large amount on deposit as they feel more secure knowing these funds are available. As an equity release adviser, we would explain the pros and cons of this course of action and maintain equilibrium for both parties.
  5. Ask for assistance from other family members – Equity Release Supermarket has experience of situations where brothers, sisters or even children have assisted their parents, rather than letting them take a release of equity form their property. This could be achieved by a family member taking a personal loan, remortgaging or even taking funds from their own personal savings. Lending to parents can have its drawbacks too, & we have seen occasions where this has created more family issues than it was meant to solve. However, with formal agreements in place if necessary, this can still be a good equity release alternative.
  6. Reduce your expenditure – with an increase in equity release lending being for debt consolidation purposes, many people have found the income transition from employment to retirement is a struggle. To maintain living standards in retirement, compared to employment is difficult for many & some never come to terms with this loss of income. By not cutting the cloth accordingly, debts amass on credit cards & loans & the downward spiral begins. By planning ahead before retirement & then analysing where cutbacks could occur once retirement starts, can have a significant influence on future retirement finances.
  7. Take in a lodger – one suggestion that always raises a smile, but in theory for many could help bring in extra income. The government ‘rent a room’ scheme allows home owners to let out a furnished room and receive upto £4,250pa in gross receipts without liability to income tax. For many however, sharing their main residence with other people may not sit too comfortably, however for individuals with room to spare it could create a good tax free income. Remember to check with your home insurance company & any lease that may exist on the property to ensure it does not create any exemptions.
  8. Consider other types of loans – credit card, personal loan, mortgage, HP – depending on affordability & the duration of the lump sum required, there are shorter term loan options available than equity release. A personal loan or strict use of a credit card and using some of the 0% credit offers available could prove to be extremely costs effective. The lifetime nature of equity release schemes means that if they are paid off early, there could be considerable early repayment charges levied by the provider.  Beware of high APR’s on loans and credit cards & bear in mind potential rate changes that could occur in the future should interest rates rise again.

 

As you can see before taking equity release club together all the ideas above and assess whether any of the aforementioned financial solutions could help yourself and/or beneficiaries over time. Equity Release Supermarket always suggest speaking to your children in any case to allay issues over inheritance.

 

To discuss how your equity release club of measures could help, contact the Equity Release Supermarket team of advisers on 0800 678 5159 or email mark@equityreleasesupermarket.co.uk

 
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