As of Thursday 11th May 2023, the Bank of England raised interest rates to 4.5%, marking the 12th consecutive rise. This means that people with variable mortgages will have to bear the brunt of the increase in monthly payments, yet again.
However, for those over 55s, there is a potential way to alleviate this financial burden. By considering equity release, they can replace their existing mortgage and choose whether they want to continue making monthly repayments altogether.
The rising interest rates have been a cause for concern for many homeowners, especially those on a fixed income or those where their current interest-only mortgage deal is coming to an end. With each consecutive rise, mortgages on a standard variable or tracker rates have their monthly mortgage payments rising, leaving little room for discretionary spending. For those who are nearing retirement or within retirement, the prospect of having to continue making increasing mortgage payments can be daunting.
This is where equity release has become very popular. Equity release is a way to access the equity in your home without having to sell it. Essentially, it allows you to borrow a cash lump sum based on your age and property value. The equity release scheme is secured against your home, and the loan is usually repaid when the property is sold, which happens after the last homeowner passes away, or moves into long-term care.
Equity release could be a great option for people age 55 and over who are struggling with their monthly mortgage payments. By replacing their existing mortgage with a lump sum equity release plan they then have the option of choosing whether to make any monthly repayments, and even then at what level they are comfortable paying.
With a lifetime mortgage (the most popular form of equity release) there is no proof of income required or affordability checks, unlike a conventional mortgage - so no mandatory payments are required. Instead, you can choose whether to make flexible voluntary repayments of up to 10% pa of the amount borrowed to help keep the cost of the loan under control.
This can be especially beneficial for those who are retired and living on a fixed income with an outstanding mortgage. It’s important to note that any existing mortgage must be repaid before or on completion of your equity release plan.
Of course, equity release is not without its risks. It is important to do your research and shop around for the best deal, that’s where smartER comes in. smartER is the only live consumer research tool in the equity release market that allows you to view products and deals based on your personal circumstances. It’s easy to use and will only show you accurate rates and exact amounts that are available.
Equity release is an advised product and regulated by the FCA, which means that you need to speak to a financial adviser if you’re considering taking equity from your home. It’s really important that you speak with a whole of market adviser who is independent of any specific lender to ensure you get the most suitable product possible. Equity Release Supermarket advisers are exactly that - independent and whole of market, and you can find your local adviser here.
For those who are struggling with monthly mortgage payments, equity release could provide much-needed financial relief, and allow homeowners to stay in their homes to help maintain their quality of life.
The 12th consecutive rise in interest rates means that monthly mortgage payments could increase again. For those over 55s who are struggling with these payments, equity release could be a viable option to replace their existing mortgage and choosing whether to avoid making monthly repayments altogether.
However, it's important to weigh the risks and benefits before making any decisions and consult with a financial adviser after your initial research.
Equity Release Supermarket are independent of any specific lender, always whole of market, and have access to exclusive products through smartER that you won’t find anywhere else. Their advisers are locally based, fully qualified, and take the time to understand your circumstances. There are no fees unless you decide to take an equity release loan and you’re under no obligation to go ahead.
For full risks and features please ask for a no-obligation personalised illustration.
