Equity release is the process of releasing tax-free cash from the value of your home if you are aged 55 or over – effectively using the money invested in your home to generate income.
Many equity release products are based on a ‘lifetime mortgage’, which is a loan secured against your property, usually repaid from the sale of your home when you die or move into residential care.
Like any loan, the lifetime mortgage is susceptible to current economic shifts and as such the average product rate has risen from 4.1% in January 2022 to 5.74% in August, according to the Equity Release Council.
Rising interest rates coupled with an anticipated fall in house prices, could spell a rocky period for the equity release market due to the ‘no negative equity guarantee’, which means the borrower will never owe more than the value of their property.
This safeguard is designed to protect borrowers but it does have the potential to hit equity release lenders hard.
For borrowers, now might be a good time to lock in the value of their homes before property prices take a serious hit and reduce the amount available to be released via a lifetime mortgage.
If you are over 55 and are considering equity release, my advice is to take independent financial advice to ensure this is the most suitable way to provide for your retirement. Should you decide to enter into a lifetime mortgage you will need legal advice, just as you would with any mortgage, so choose an experienced solicitor to support your transaction.
To speak to any member of our 5-star property and conveyancing team please phone our Stoke-on-Trent solicitors on 01782 205000, our Altrincham solicitors on 0161 929 8446 or our Birmingham solicitors on 0121 526 3025. Alternatively, you can email firstname.lastname@example.org.