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Lifetime Mortgages - The Idea of Balance

Updated: Jun 18

lifetime mortgages

There is a difference between industry articles about lifetime mortgages, and those articles written for the public. The ones you see in the industry press tend to be about new products, average interest rates, whether demand is higher or lower than last quarter and last year, what factors are influencing these things and so on. Whilst such articles may be racy enough to quicken the blood of any self-respecting adviser, they would leave most of the public cold.

The articles that the public see are about how lifetime mortgages can be useful, how they can help to pay off an interest only mortgage that has fallen due for redemption, or how the benefits of lifetime mortgages are likely in due course to make them a mainstream financial solution for later life borrowers. These are useful too, for those new to the idea, and of course the article you write to a relative newcomer to a subject is not the same as you write for a long-in-the-tooth campaigner. My concern is with an aspect of these articles, the one about Balance.

Now balance is good. Equity Release, once a solution of last resort can in many cases be very liberating for a person with no family support and no beneficiaries, who has a great deal of equity in their property, but whose fixed income may now mean they have to choose between heating and eating. Where borrowers have a great deal of equity and a fairly sizeable pension income and want to help younger generations onto the property ladder, or reduce their estate’s liability to inheritance tax, equity release can also be of use.

The flip side of this is where a borrower already has a good pension income, where releasing equity would mean cash sat in the bank costing them interest while their children’s inheritance is ebbing away through compound interest, or where the borrower would pay interest on a mortgage which could cost them their state benefit entitlements. The fact is that sometimes there are very good reasons to take an equity release lifetime mortgage and sometimes there are very good reasons not to. There we go. Balance. So far so good.

The ‘balance’ that these articles strike, however, tends to be about a reality of the past. A TV documentary not long ago purported to be about modern equity release but was in the main about the shared appreciation mortgages of the 1990’s. News articles regularly extoll the benefits of a lifetime mortgage before adding in an example of someone who was mystified to discover that their parents took out a lifetime mortgage at 7%, even when typical mortgage rates were 7%. Or they quote unrealistic rates. Are these claims true in the context of today’s lifetime mortgage market?

The industry has made mistakes, and we should still talk about them, but in acknowledging the realities of the past, perhaps we should also acknowledge the great strides forward over the past few years, and make more mention of the assurances that now come as standard, courtesy of the Equity Release Council; independent legal advice, the right to move or downsize, the right to repay, and of course the no-negative equity guarantee. For me, balance would be about measuring today's benefits against todays risks, and because every client and every client need differs from the last, the balance should be as much about the quality of advice. Clients should know that their initial consultation with an adviser need not cost them anything, that some advisers can access all lenders and some only a few, that they should never feel rushed into a decision whilst still absorbing information for the first time, and that sometimes the advice, whether they like it or not, will be that ‘this is not for you’, at least not for now.

If we are going to give a proper picture of the reality of today’s lifetime mortgage market, we can do that less by comparing todays oranges with yesterdays bad apples, and more by promoting the notion that there are advice firms who will give borrowers the time, the space and the whole range of products they need, and those who will not. That’s balance.

If you would like to get some balanced advice on your own circumstances, from a firm that promotes giving the right advice, every time, and has access to the whole of the market, please don’t hesitate to give Viva Retirement Solutions a call on 0800 046 9776.

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