Parental equity could help first time buyers

The mortgage industry should look into developing products that allow first time buyers to tap into the equity locked in their parents' homes.

This was the conclusion of research by Peter Williams, executive director of the Intermediary Mortgage Lenders Association, for the Building Societies Association.

This is an interesting point and, of course, the products for this already exist - equity release.

Indeed, with first time buyers typically being in their mid to late twenties, it may be that their parents are in their fifties and perhaps too young for equity release.

Grandparents may be the ones more likely to consider equity release to help their family onto the property ladder.

IFA, mortgage brokers or solicitors should contact me if they wish to discuss the possibilities.

Which? under fire for equity release comments

The Association of IFAs (AIFA) has criticised consumer watchdog Which? after it hinted its report into the quality of equity release advice given by intermediaries will be far from glowing, reports IFA online.

Chairman John Gummer MP says Which? "talks as though IFAs behave badly naturally", adding he disapproves of its suggestion equity release should be a last resort.

It follows comments made today at a debate hosted by solicitor Eversheds and trade body Safe Home Income Plans (SHIP).

Speaking at the event, Which? spokesperson Teresa Fritz said the consumer body was in the process of conducting a mystery shopper exercise on a number of equity release advisers.

Although Fritz pointed out the study is still at an early stage, she admitted early results suggest a poor level of advice, with conduct of business rules ignored.

But Gummer hit back: "Which? talks as if we in the industry are a group of people that behave badly naturally.

"I do not like its statement equity release should be a last resort. It is an option that should be considered carefully. We do not want to frighten off people for whom this is the best option."

Gummer adds while intermediaries provide a good standard of advice, they cannot force clients to follow it.

Base Rate Collapse Cuts Pensioners’ Income By Nearly A Quarter

The slide of interest rates to historically low levels has seen more than 8 million pensioners’ monthly income fall by nearly 25% over the last 12 months, according to figures from SHIP (Safe Home Income Plans), the equity release trade body.

SHIP’s figures show that, in April 2008, the average pensioner received £158 per month from their savings. This was in addition to their pension and accounted for 28.62% of their total income.

The fall in base rate has seen that income slide to just £16 per month, or 4% of their total income.

With perhaps little chance of bases rates rising to last year’s levels soon, pensioners need to consider alternative sources of income. On such possibility for homeowners is equity release.

Equity release can offer a real solution to pensioners’ problems. For example, a 75 year old woman with a property worth £300,000 could release up to £900 per month for 15 years. This would more than cover her loss of income.

“One solution for those pensioners needing to boost their income is equity release. The over 60s can release some of the wealth tied up in their property and increase their retirement income substantially should they wish” said Andrea Rozario, Director-General of SHIP.

Equity Release and the Credit Crunch

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 bit part 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 mortgage market, it may be affecting some potential clients.

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?

Possibly 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.

Introducing Chris Grenan

Sixty Plus are delighted to welcome Chris Grenan as Business Development Manager.

Chris has more than 30 years experience in financial services and will be developing relationships with IFAs and solicitors as well as arranging seminars with interested groups.

David Wright, Managing Director, said "Chris joins us at a time when economic woes are constantly in the headlines. However, Equity Release is proving more resilient than other sectors and we are optimistic about the coming year."

We aim to make Sixty Plus a major name in Equity Release in the South East and we believe relationships with IFAs is key to this aim. With advisers in Surrey, Kent and Essex we are well placed to cover the whole region."

Chris can be reached on 07949 949590 or click here to email Chris.

ERSA formally launches

The Equity Release Solicitors’ Alliance (ERSA) has formally launched today, with each of the body’s members committing to a charter outlining their promise to provide independent, personal level of service in plain English, reports Mortgage Solutions.

Other commitments include that clients will receive a personal consultation, fair and balanced reports in writing, service level agreements, and all members will offer a no-completion, no fee service. For IFAs, ERSA also guarantees that intermediaries will be paid their fees on the day of completion.

ERSA is a group of established law firms which specialise within the area of equity release, which has joined together to promote the need for homeowners to have access to independent, competitively-priced expert legal advice before they take up an equity release plan.

Claire Barker, chairman at ERSA, commented “If current predictions are correct, the equity release market will double in the next five years, and by 2016 it is estimated that 42% of the population in England and Wales will be eligible to take out an equity release plan. With the market expected to grow at such a rate it is essential that all of these consumers are receiving the best possible legal advice before proceeding with a plan.

“Solicitors have to remain independent to ensure that homeowners only take out an equity release product once they have carefully considered the pros and cons of going ahead from an unbiased third party. This will also help to ensure that the future reputation of the industry remains intact.”

Sixty Plus comment: We welcome this development as independent legal advice is integral to the process of arranginging an equity release plan. It will help us to demonstrate to clients those firms that are as committed to equity release as ourselves.

Sixty Plus joins 'Buy with Confidence'

We are pleased to announce that Sixty Plus has been accepted into Surrey Trading Standards' Buy With Confidence scheme.

All the businesses in the scheme have been vetted and approved by Trading Standards to ensure that they operate in a legal, honest and fair way.

"We are keen to go the extra mile to show potential clients that we are the people to see for honest, independent advice on Equity Release." said Managing Director of Sixty Plus, David Wright.