Cover
by
Henry Knight, managing director of
Springtide Capital
have the time to extend the term and therefore need to come up with alternatives.
Between the late 1990s and the back end of 2009 interest-only mortgages were widely available and the criteria was far less stringent.
Whilst a number of people thought they had a viable repayment option more often than not that option may not have been quite as robust as they had previously anticipated. Many people have since had to
review their repayment strategies. Due to lower rates borrowers have been able to switch to repayment options across a longer term without adding to their monthly payments.
For people of retirement age this is more of a problem as they do not
lenders. For them to even look at the market again shows just how far it has come.
“Any negative publicity surrounding
equity release dates back to the 1980s in the days of non-regulation and those plans bear little comparison with the equity release plans of today,” says Garrod.
Back in the late eighties through to the late nineties equity release endured a lot of negative press and often this was not totally underserved. In the nineties Barclays and Bank of Scotland offered their Shared Appreciation Mortgage at a time when the market was stagnant. They offered an equity release style product that required no monthly payments and would take a share of the future inflation in the value of the customer’s property. With almost 11,000 shared
appreciation mortgages sold and a static housing market many expected to repay a few thousand for the privilege. By the time of the recession house prices had almost quadrupled which left many customers unable to move home with high street banks taking the lion’s share
Many will look at equity release as a solution and whilst in many cases this can represent a very good option it is not always right for everyone. In many cases the option of a lon- ger term mortgage remains and there are a number of lenders willing to lend beyond the normal retirement age with some going up as far as aged 85, particularly where they can see a solid pension income capable of support- ing the debt. Whilst equity release is a sensible option for many people it is still a good idea to take independent advice.
As a whole of market brokerage we do believe that the more options there are for equity release the better. Therefore we welcome the news of the high street banks potentially re- entering the market.
of their equity. More recently the likes of NatWest and RBS entered the lifetime mortgage market in 2006 but withdrew from the market by 2009 as funding for the scheme dried up.
HSBC also dipped their toes in the water linking up with the now defunct In Retirement Services. In Retirement were an equity release provider in their own right and HSBC’s decision to tie in with a non-independent equity release company left many bemused. That relationship ended when In Retirement Services went into administration due to funding issues in 2009.
Halifax also had its popular Halifax
Retirement Home Plan which was widely sold up until August 2011. Garrod says “Banks re-entering the
equity release space will have a positive impact on the housing market,” she says. “The Halifax left the market a few years ago and had a great product. “Equity release is going to be the only option for some people and if their mortgage is too high to fit the equity release criteria, lenders should be able to help their clients by extending their term
36 MORTGAGE INTRODUCER SEPTEMBER 2013
and not forcing a sale if payments are up to date with no arrears.” Chris Prior, of Bridgewater Equity Release, says any suggestion that banks may become active in the equity release market is a good thing – especially given the interest-only time bomb.
INTEREST-ONLY The FCA’s recent thematic review of interest-only mortgages revealed the possible extent of the issues some Interest-only mortgage customers could face in the future. Interest-only was seen as an easy way onto the housing ladder for many and coupled with a repayment vehicle such as an endowment borrowers were confident that they would be able to repay their loans.
However the FCA has warned that with more than 2.6 million Interest-only mortgages due for repayment over the next 30 years one in 10 do not have a plan in place to repay their loan. Up to 1.3 million Interest-only
borrowers face shortfalls averaging around £72,000 due to over optimism in their repayment vehicles. Those borrowers facing the most urgent problems, according to the regulator, are those whose loans are due to end before 2020. The majority of which are typically high-income individuals approaching retirement and largely based in the South of England.
FCA chairman Martin Wheatley says it’s time for action. “My advice to borrowers is not to bury your heads in the sand – take action now.”
OPTIONS Equity release is obviously one option for those who have found themselves having difficulties repaying their Interest-only mortgage but there are others. “People are finding themselves in big
difficulties,” says Steve Lowe of Just Retirement.
“When it comes to 65 and you’re set
to retire with £60-65k left remaining what do you do? As an IFA or an adviser what do you do when someone walks though your door and says I owe my lender £30,000? My retirement income won’t pay the mortgage what can you do to
www.mortgageintroducer.com
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52