HEARTS, MINDS AND EQUITY RELEASE

TODAY’S BLOG

EQUITY RELEASE SURGE

A surge in homeowners looking to free up cash from their properties propelled the figure for equity release to £1.05bn in the three months to the end of September, driven by high house prices, gifts to family members and uncertainty induced by the coronavirus pandemic. The value of equity released jumped by nearly one-fifth from £884m in the third quarter of 2020.

While the number of loans taken out was slightly down year on year, the average amount of housing wealth freed up was 23% higher, at £101,593 per borrower. Data published this month by one of the main equity release providers (Key) suggested many borrowers were taking advantage of recent house price gains to help family members climb the housing ladder. “Big-ticket items” such as debt management and gifting were behind nearly two-thirds of the equity released in the third quarter. More than two-fifths (42%) of the cash given to family and friends was used for house deposits.

For homeowners over the age of 55, equity release offers a way of unlocking the value of their properties, whether for home improvements, paying off other debts or to help family members. Interest on the loan is paid through the sale of the house at the end of the term, so unlike a conventional mortgage a borrower is not required to demonstrate a minimum level of income to qualify. Interest rates are higher for these “lifetime mortgages” than for most mainstream mortgages. Interest rates are low by historic terms, but equity release is a not straight-forward.

Hearts, Minds and Equity Release

THE POWER OF COMPOUNDING INTEREST

Equity release is not like a normal mortgage, repaid over a set time. It is generally a loan which is only repaid when the property is sold. Overall, no payments are made, the interest merely compounds. By now you know the miracle of compounding interest – which works wonderfully for your investments and does precisely the opposite for your debt.

The risks you need to consider are future interest rates, the future value of your home and how long you will live or anyone else that you share it with. The earlier you release equity, the bigger your total debt in the end. Admittedly this helps reduce the value of an estate for inheritance tax, but in practice it can simply mean that there is nothing to inherit.

Some of you may remember the significant property crash in the late 1980s. At the time equity release was very popular and many people got caught out by the reduced value in their home and the increasing interest rates. All conspired to create genuine stress and financial hardship for some. There have been reforms, but I would urge caution – a lot of it. This should always be considered in the context of your total financial planning, not simply a desire to help a family member.

We do not provide advice about equity release but can refer you to a specialist. However, you should exercise great caution and have a clear plan and reason about why you want the funds. Interest rates are normally higher than a typical mortgage. The fact that around half of those using equity release are between 65 and 74 does not bode well for those that may live for 2 or 3 decades.

As ever, good financial management starts with good budgeting and a proper plan.

Dominic Thomas
Solomons IFA

You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email info@solomonsifa.co.uk

GET IN TOUCH

Solomon’s Independent Financial Advisers
The Old Bakery, 2D Edna Road, Raynes Park, London, SW20 8BT

Email – info@solomonsifa.co.uk 
Call – 020 8542 8084

7 QUESTIONS, NO WAFFLE

Are we a good fit for you?

Take Survey

GET IN TOUCH

Solomon’s Independent Financial Advisers
The Old Bakery, 2D Edna Road, Raynes Park, London, SW20 8BT

Email – info@solomonsifa.co.uk    Call – 020 8542 8084

7 QUESTIONS, NO WAFFLE

Are we a good fit for you?

Take Survey

HEARTS, MINDS AND EQUITY RELEASE2021-11-30T14:02:29+00:00

HOT PROPERTY OR COOLING DOWN?

TODAY’S BLOG

HOT PROPERTY OR COOLING DOWN?

UK house price growth has dropped to its slowest pace in four months, new data shows, as the temporary stamp duty holiday ended a boom in the property market. Halifax said on Friday that annual house price growth in the UK slowed to 7.6% in July, down from 8.7% in June. July’s reading was the lowest since March. The slowdown came as a tax break on property transactions came to an end. The chancellor announced a stamp duty holiday in July 2020 that ended in June.

You will be perfectly aware that property prices and location make little sense. It is still perplexing to see the prices that people will pay for a home and what we all think our pile of bricks is worth. So when reading data about property prices, take with a pinch of salt as the variance in “rising prices” is considerable not simply across the country, but within a local London borough.

It is also evident that the property “crisis” is not going to end soon and the only way most people in their twenties in southern England can afford a home is if a relative leaves them funds.

I thought you might find the tables below (sorry I have not mastered posting excel tables here) of some interest. These are places our clients live or have some connection or visit and so on. You can play “spot where Waitrose might be”. The average values information is from Zoopla today. The larger cities and towns are likely disadvantaged by the number of housing which is more likely to push down the average value. However you are all quite able to realise this for yourselves and will more likely remark at the vast differences in general across the country from Ascot to York.

Hot property cooling?
LOCATION £ AVERAGE VALUE
ASCOT 875,236
ASHTEAD 751,310
BANSTEAD 622,391
BASSINGHAM 328,043
BATH 530,846
BIRMINGHAM 218,932
BRADFORD 139,989
BRADFORD ON AVON 468,886
BRIGHTON 445,631
BRISTOL 358,092
BROADWAY 539,513
BURY ST EDMUNDS 345,814
CAMBRIDGE 483,235
CARDIFF 271,241
CATERHAM 542,720
CHELSEA 1,968,682
CHELTENHAM 400,586
CLAPHAM 760,086
CLAYGATE 914,061
CLIFTON, BRISTOL 609,016
COBHAM 1,197,138
COTTINGHAM 248,156
CRANLEIGH 617,406
DERBY 223,218
DORKING 616,990
DURHAM 174,841
EDINBURGH 322,309
EMSWORTH 445,595
EPSOM 564,334
ESHER 1,098,649
EXETER 323,170
GLASGOW 208,828
GUILDFORD 613,276
HEATHFIELD 459,222
HENLEY ON THAMES 876,576
HOPE VALLEY, DERBYSHIRE 400,743
HORSHAM 458,448
HULL 147,731
ISLE OF WIGHT 286,722
KENSINGTON 1,871,568
KESWICK, CUMBRIA 374,254
KINGSTON UPON THAMES 623,538
KNIGHTSBRIDGE 2,887,395
LEATHERHEAD 824,727
LEEDS 237,970
LEICESTER 257,473
LIVERPOOL 189,644
LUDLOW 312,723
MANCHESTER 209,830
LOCATION £ AVERAGE VALUE
MARLOW 725,186
MAYFAIR 2,335,280
NEW MALDEN 640,941
NORWICH 298,797
NOTTINGHAM 231,554
OXFORD 515,613
OXSHOTT 1,988,799
PUTNEY 783,076
REIGATE 650,073
RICHMOND ON THAMES 913,139
RIPLEY (SURREY) 641,346
SALCOMBE 762,901
SALISBURY 394,427
SHREWSBURY 281,540
ST ALBANS 608,263
SURBITON 604,492
SWANSEA 198,269
TELFORD 191,829
TRURO 376,079
UCKFIELD 484,426
WEST EALING 675,034
WEST WITTERING 666,953
WEYBRIDGE 945,264
WIMBLEDON VILLAGE 1,512,663
WINCHESTER 576,821
WINDSOR 637,604
YORK 322,059

Dominic Thomas
Solomons IFA

You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email info@solomonsifa.co.uk

GET IN TOUCH

Solomon’s Independent Financial Advisers
The Old Bakery, 2D Edna Road, Raynes Park, London, SW20 8BT

Email – info@solomonsifa.co.uk 
Call – 020 8542 8084

7 QUESTIONS, NO WAFFLE

Are we a good fit for you?

Take Survey

GET IN TOUCH

Solomon’s Independent Financial Advisers
The Old Bakery, 2D Edna Road, Raynes Park, London, SW20 8BT

Email – info@solomonsifa.co.uk    Call – 020 8542 8084

7 QUESTIONS, NO WAFFLE

Are we a good fit for you?

Take Survey

HOT PROPERTY OR COOLING DOWN?2021-08-13T15:45:12+01:00
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