Unlocking solutions amidst the cost of living crisis
By Kay Westgarth, Head of Sales, Standard Life Home Finance
This year has already seen energy, fuel and food prices soar. Given the scale of these increases, it’s likely that for many this combination of price hikes will have already exceeded their disposable income.
At a time of life when most are hoping to preserve as much as possible to enjoy later life, research found a third of over-55s were already claiming they expected to accrue debt over the next year just to make ends meet1, before the recent surge in the cost of living.
Compounded by lower product availability and tougher affordability criteria, many who are facing a maturing interest-only mortgage or the end of their promotional rate may simply not be able to afford to stay in their homes.
A sentiment sadly shared, with Consultancy Capital Economics stating: "The scale of the increase in mortgage rates means that a large rise in mortgage arrears and repossessions is probably unavoidable.”2
Consider property wealth as an option
While it’s expected that the total debt of those aged 55 or over in the UK will reach £294billion this year1, homeowners of the same age bracket are reported to have a collective property wealth of £4.4trillion.3
By accessing some of that property wealth, homeowners could not only repay their mortgage, but also free up more disposable income for other needs or wants.
Downsizing is, of course, one option. But with uncertainty around house prices and a lack of suitable, affordable later life housing stock, selling on and buying elsewhere may not always be a credible solution.
Another option, however, could be equity release.
Equity release could be an option for some
Equity release gives homeowners access to some of their property’s value in tax-free cash, enabling them to clear their existing mortgage, all without the need to move.
And with a lifetime mortgage - the most popular form of equity release – there are no mandatory monthly repayments, meaning they’ll be better able to balance their later life finances with a boost in disposable income. Other benefits include interest rates fixed for life, full ownership of your home with zero risk of repossession, and there are no affordability criteria.
So, those facing an almost-impossible situation right now shouldn’t feel as though they have no options. With the modern lending features of equity release, coupled with the help of an adviser to ensure it’s the right option for them, many may be able to stay in the home they love, boost their disposable income, protect themselves against any further market volatility and live out a more comfortable later life.
The importance of expert advice
Consumers facing financial hardship are more likely to be vulnerable – perhaps for the first time in their lives. That means they could be susceptible to making poor financial decisions, especially when it comes to borrowing.
It’s therefore more crucial than ever that consumers seek out expert advice when considering whether Equity Release is the right option for them, to ensure they are balancing their short-term needs with their long-term plans before making any decision.
To offer your clients more choice and options for a brighter retirement, explore our Defaqto 5 Star rated Horizon lifetime mortgages today.
1 more2life: Borrowing in later life 2022
2 Capital Economics
3 ONS via City A.M.