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How Equity Release Can Help With Rising Living Costs

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How Equity Release Can Help With Rising Living Costs.

The long-awaited “1st April 2002 fuel price cap” rise is upon us.

The enormity of this will be felt by every homeowner in the UK, with the older population likely to be particularly affected as they navigate rising fuel costs, food prices and the cost of living increases on a largely fixed income.

Energy providers were obliged to keep the price they charge for gas and electricity capped for the last six months, despite the wholesale costs of fuel increasing rapidly WHY?. This has led to many companies who provide domestic gas and electricity stopping trading as they have been unable to purchase fuel for less than the contracted price of resale to the consumer.

However, on 1st April, the price cap ends. Ofgem has announced that the price cap will increase by 54% at the start of April which will see the average domestic bill increase by £693 from £1,277 to £1,971. With prices set to increase even further in October, these are worrying times for anyone paying for gas and electricity.

Martin Lewis, consumer champion has said ‘the coming crisis will be worse for families’ wallets than the financial crash of 2008 or the Covid pandemic, with an additional £1,300 a year on average bills for gas and electricity and 10 million people likely to be thrust into fuel poverty.’

The government are considering several initiatives to reduce the impact of these additional costs and Rishi Sunak will outline some of these in his Spring mini-budget.

There is an additional consideration with many homeowners over the age of 55 inhabit which may meet their needs and objectives to improve their financial situation.

According to recent statistics, 85.6% of over 55s in the UK own their home either outright or with a mortgage. House prices have increased by over £51,455 in the last 5 years with a 13.2% increase in the last year alone.

A large percentage of those over 55’s could be eligible to release some of this equity that has amassed in their property to improve their financial situation.

Lifetime Mortgage providers have introduced so many new features to their product ranges over the last 5 years that taking out this type of mortgage could be a viable solution for many. We know that many homeowners over the age of 55 are already using Lifetime Mortgages in ever-increasing numbers with 24% more being lent in 2021. The uses of these funds have been increased to repay Interest Only mortgages, make home improvements, consolidate debt and gift to family.

Whilst it may be a controversial solution for some due to the Lifetime Mortgage products being designed to be repaid on death of the homeowner, entry into residential care or otherwise leaving the property, later life Mortgage lending options (such as equity release: Lifetime Mortgages) could certainly be a useful solution for many to ease their financial situation and provide supplemental income.

Consequently, the current economic and financial situation may become the catalyst for many over 55’s to implement effective financial planning strategies to review their property wealth, improve their financial position and perhaps start inter-generational wealth transfer to support their families when they may need it most.

As an example, a couple aged 68 and 72 with a property value of £250,000 could borrow up to £58,750 at an interest rate of 3.13%. If they wanted an initial advance of £20,000 and for the debt to remain the same, then by paying approximately £52 per month, their debt would not increase.

By opting for a drawdown mortgage, they could borrow the initial amount and then drawdown further funds if required for future needs.

Of course, this is not the right solution for all and all alternatives to equity release will need to be fully explored by an appropriately qualified and experienced Equity Release Mortgage Advisor to ensure that the needs and objectives are thoroughly explored, with clients advised accordingly.

However, at a time when Martin Lewis has admitted that ‘his tool kit is empty’ as he has exhausted all other solutions and with the government being so indebted due to the Covid support it has given the UK, all options require full consideration.

My advice would be for homeowners over the age of 55 to begin some initial research to establish if this is a viable option. Find an Equity Release advisor on the Equity Release Council’s website.

The long-awaited “1st April 2002 fuel price cap” rise is upon us.

The enormity of this will be felt by every homeowner in the UK, with the older population likely to be particularly affected as they navigate rising fuel costs, food prices and the cost of living increases on a largely fixed income.

Energy providers were obliged to keep the price they charge for gas and electricity capped for the last six months, despite the wholesale costs of fuel increasing rapidly. WHY? This has led to many companies who provide domestic gas and electricity stopping trading as they have been unable to purchase fuel for less than the contracted price of resale to the consumer.

However, on 1st April, the price cap ends. Ofgem has announced that the price cap will increase by 54% at the start of April which will see the average domestic bill increase £693 from £1,277 to £1,971. With prices set to increase even further in October, these are worrying times for anyone paying for gas and electricity.

Martin Lewis, consumer champion has said ‘the coming crisis will be worse for families’ wallets than the financial crash of 2008 or the Covid pandemic, with an additional £1,300 a year on average bills for gas and electricity and 10 million people likely to be thrust into fuel poverty.’

The government are considering several initiatives to reduce the impact of these additional costs and Rishi Sunak will outline some of these in his mini-budget this week.

There is an additional consideration with many homeowners over the age of 55 inhabit which may meet their needs and objectives to improve their financial situation.

According to recent statistics, 85.6% of over 55s in the UK own their home, either outright or with a mortgage. House prices have increased by over £51,455 in the last 5 years with a 13.2% increase in the last year alone.

A large percentage of those over 55’s could be eligible to release some of this equity that has amassed in their property to improve their financial situation.

Lifetime Mortgage providers have introduced so many new features to their product ranges over the last 5 years that taking out this type of mortgage could be a viable solution for many. We know that many homeowners over the age of 55 are already using Lifetime Mortgages in ever-increasing numbers with 24% more being lent in 2021. The uses of these funds have been increased to repay Interest Only mortgages, make home improvements, consolidate debt and gift to family.

Whilst it may be a controversial solution for some due to the Lifetime Mortgage products being designed to be repaid on death of the homeowner, entry into residential care or otherwise leaving the property, later life Mortgage lending options (such as equity release: Lifetime Mortgages) could certainly be a useful solution for many to ease their financial situation and provide supplemental income.

Consequently, the current economic, and financial situation may become the catalyst for many over 55’s to implement effective financial planning strategies to review their property wealth, improve their financial position and perhaps start inter-generational wealth transfer to support their families when they may need it most.

As an example, a couple aged 68 and 72 with a property value of £250,000 could borrow up to £58,750 at an interest rate of 3.13%. If they wanted an initial advance of £20,000 and for the debt to remain the same, then by paying approximately £52 per month, their debt would not increase.

By opting for a drawdown mortgage, they could borrow the initial amount and then drawdown further funds if required for future needs.

Of course, this is not the right solution for all and all alternatives to equity release will need to be fully explored by an appropriately qualified and experienced Advisor to ensure that the needs and objectives are thoroughly explored, with clients advised accordingly.

However, at a time when Martin Lewis has admitted that ‘his tool kit is empty’ as he has exhausted all other solutions and with the government being so indebted due to the Covid years support it has given the UK, all options require full consideration.

My advice would be for homeowners over the age of 55 to begin some initial research to establish if this is a viable option. Find an Equity Release advisor on the Equity Release Council’s website.

Request for a free, initial review and explore your options

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