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Over-55S In Record £1Billion Equity Raid On Their Homes: Older People Taking Advantage Of Booming House Prices Help Figure Surge By 20% This Year

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http://www.dailymail.co.uk/news/article-2800958/over-55s-record-1billion-equity-raid-homes-older-people-taking-advantage-booming-house-prices-help-figure-surge-20-year.html

  • Older people unable to fund lifestyles withdrawing more money from homes
  • A record £1billion was released from properties owned by over-55s this year
  • House prices are soaring while pension payouts shrink more, experts say

Older people scrambling to cash in on rising house prices are withdrawing record amounts from the equity in their homes.

An unprecedented £1billion was released from properties by the over-55s in the first nine months of the year, an increase of 20 per cent on last year.

The boom is thought to be driven by savers who hit retirement age and find their pensions are not enough to support their lifestyles.


While their pension payout is paltry, they have seen their house price soar in the past three decades.

Equity release is a way of tapping in to this wealth, possibly to use for home improvements.


Others are using the equity as a way of helping their children and grandchildren by giving them money for house deposits or weddings.

This also helps them cut their inheritance tax liability because the debt is deducted from their estate.


The average amount these retired homeowners are withdrawing in equity release has hit a record £67,467 – up 18 per cent compared with the same time last year – according to the Equity Release Council.

But critics warn that the interest on equity release loans can double every ten years.

Great news... Although with financialization the bankers will get their hands on the value of your property by any means necessary. Keep the house see all the equity vanish in care home fees.

The 99.9% are born with nothing and can expect to leave with nothing.

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Old people spending the money the young people have promised to pay.

Next time an old person tells you what a great investment housing is...tell them it certainly was for them and to go ***k themselves,

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How are they funding retirement? Taking it out for day to day spending or investing in BTL?

Either way that they are mewing again means they'll never willingly drop their prices, they're more than happy to see rampant HPI whilst the media are reporting a permanent generational divide.

Inevitably there will be sad face daily mail articles in the future on how these poor old boomers mewed without thinking and can't pay the mortgage.

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How are they funding retirement? Taking it out for day to day spending or investing in BTL?

Either way that they are mewing again means they'll never willingly drop their prices, they're more than happy to see rampant HPI whilst the media are reporting a permanent generational divide.

Inevitably there will be sad face daily mail articles in the future on how these poor old boomers mewed without thinking and can't pay the mortgage.

Why would they be paying a mortgage? They're not MEWing - they wouldn't get a mortgage even if they asked for one, as their income would be too low (this is why they're taking money out of the equity in the house).

They're using equity withdrawal. The whole point of it is that the debt is repaid (with all the interest racked up in the meantime) when they sell the house or die.

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My dotty old Aunts had a great scheme. They sold to an 'investor' on retirement but lived so long the investor died.

Before we get the usual boomer abuse, they were born early 1900's and 'equity released' sometime in the 70's. House would only have been worth about 12k-15k then (if that).

Edited by aSecureTenant

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These people aren't cashing in on recent house price rises, they are borrowing against imaginary wealth.

The young is who they expect to pay for this, but if we are truly past peak prices for this boom, it will be a long time before their cash machines are refilled, and they themselves will pay for it.

Imagine having ridden the mother of all house price booms and coming out of it destitute because you've spent all your assumed earnings...

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Why would they be paying a mortgage? They're not MEWing - they wouldn't get a mortgage even if they asked for one, as their income would be too low (this is why they're taking money out of the equity in the house).

They're using equity withdrawal. The whole point of it is that the debt is repaid (with all the interest racked up in the meantime) when they sell the house or die.

Let's take the sadly improbable scenario that house prices crash by 60%. Suppose you've got a house initially valued at £200,000 and MEW £100,000 (if they'll let you take that much). You spend the money then die, but in the meantime the purported value of the house has fallen to £80,000. Do the lenders just have to take the hit, or would they have a claim on any other assets you might happen to have?

Edit. In fact the Telegraph article says "Typically, the interest rate is around six or seven per cent, which is added to the debt and “rolls up” each year. As a result, the total debt typically doubles in around 11 years.", so it's maybe not so unlikely that the debt could exceed the eventual value of the house.

Edited by Scunnered

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Let's take the sadly improbable scenario that house prices crash by 60%. Suppose you've got a house initially valued at £200,000 and MEW £100,000 (if they'll let you take that much). You spend the money then die, but in the meantime the purported value of the house has fallen to £80,000. Do the lenders just have to take the hit, or would they have a claim on any other assets you might happen to have?

Edit. In fact the Telegraph article says "Typically, the interest rate is around six or seven per cent, which is added to the debt and “rolls up” each year. As a result, the total debt typically doubles in around 11 years.", so it's maybe not so unlikely that the debt could exceed the eventual value of the house.

Depending how old you are...the expected years you may live....55 years old £15k......85 Years old £50k......the lenders very rarely will lose out......105 years old £100k.

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Equiry release tend to will only release 30-50% of the estimated 'value'.

They - not you - value the house, and they value them very low.

Not sure if the debt is restricted to the house.

I would guess they could go after other assets in the estate, but, after the house, whatever asset do most OAPs have?

I've not been to many OAP with Monets on the wall.

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Let's take the sadly improbable scenario that house prices crash by 60%. Suppose you've got a house initially valued at £200,000 and MEW £100,000 (if they'll let you take that much). You spend the money then die, but in the meantime the purported value of the house has fallen to £80,000. Do the lenders just have to take the hit, or would they have a claim on any other assets you might happen to have?

Edit. In fact the Telegraph article says "Typically, the interest rate is around six or seven per cent, which is added to the debt and “rolls up” each year. As a result, the total debt typically doubles in around 11 years.", so it's maybe not so unlikely that the debt could exceed the eventual value of the house.

Depends whether there's a "No Negative Equity Guarantee" as per the Equity Release Council Code of Conduct. If there is, the lender has to write off any shortfall if the house's value has decreased to less than the sum borrowed plus however many years of interest (and the sum can double in 15 years).

If there is no such guarantee, then the lender can have a claim on the rest ot the borrower's estate. Of course if there is no or little other money in the estate, the lender will just have to write off the shortfall in this case too.

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These financial houses make a long term living off houses going up in value in the long term. So businesses like these will be around for some time as long as house prices go up, they get more business and make money.

So how many businesses base their business model on house prices going down?

Hmm this might say something about what the long term future holds.

Another question that some one can answer, is the market in Japan for equity withdrawal growing or contracting? Is our industry growing or contracting?

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These financial houses make a long term living off houses going up in value in the long term. So businesses like these will be around for some time as long as house prices go up, they get more business and make money.

So how many businesses base their business model on house prices going down?

Hmm this might say something about what the long term future holds.

Another question that some one can answer, is the market in Japan for equity withdrawal growing or contracting? Is our industry growing or contracting?

Do they have equity withdrawal in Japan?

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Let's take the sadly improbable scenario that house prices crash by 60%. Suppose you've got a house initially valued at £200,000 and MEW £100,000 (if they'll let you take that much). You spend the money then die, but in the meantime the purported value of the house has fallen to £80,000. Do the lenders just have to take the hit, or would they have a claim on any other assets you might happen to have?

Edit. In fact the Telegraph article says "Typically, the interest rate is around six or seven per cent, which is added to the debt and “rolls up” each year. As a result, the total debt typically doubles in around 11 years.", so it's maybe not so unlikely that the debt could exceed the eventual value of the house.

Banks charging this rate of interest is disgusting as far as I am concerned. If you as an individual were to offer equity release at that rate and had to forego having the money until the person died. It is a reasonable rate.

But what are the banks doing. They simply type the money into a computer and wait to collect. No one in the bank has to forego holidays abroad or buying a new car because of the loan. No one has got their life on hold waiting for some one to die. To get 7% return for a few key strokes is immoral.

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Banks charging this rate of interest is disgusting as far as I am concerned. If you as an individual were to offer equity release at that rate and had to forego having the money until the person died. It is a reasonable rate.

But what are the banks doing. They simply type the money into a computer and wait to collect. No one in the bank has to forego holidays abroad or buying a new car because of the loan. No one has got their life on hold waiting for some one to die. To get 7% return for a few key strokes is immoral.

It's a tricky game they are playing. One one hand, if the person sold up rather than took equity release the bank may be able to make a larger loan to the new purchasers(equity release is often limited to about 35% LTV), although likely at a lower rate than 6-7%.

Typically the debt will be limited to the value of the house, so if a person lives 'too long' or the house drops in value below the outstanding debt the banks return will be lower than 6 or 7%. It seems to me like the difference in rates for normal mortgages and equity release are no more than a risk premium to account for an HPC or a customer who lives on organic brown rice.

The issue is that people will tap out their equity release options pretty quickly, especially if care home fees are involved. A big home in the UK might be worth £300k, so £100k released equity might last for 4 years of care home fees between the occupants. Not a lot. An average home will be much less.

Edit just to say I'm not defending it. Equity release is a bad deal and people would be better selling up entirely.

Edited by Joan of The Tower

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Martin Lewis: Five unpleasant truths you can't ignore

27 Mar 2014

4. If you need to release equity from your home, downsize sooner not later

[...] Otherwise it’s an expensive way to unlock your home’s value. That’s why I’d again note – do explore downsizing earlier. While you may argue house price inflation means it’s worth holding on, that won’t help you if you never get round to it.

more at: http://www.telegraph.co.uk/finance/personalfinance/10725991/Martin-Lewis-Five-unpleasant-truths.html

£48,000 amazing cash-into-savings from downsizing (don't blame everyone else if they choose a bad small house that needs new boiler) - £360,000 fortunes downsizing to a bling £600,000 place.... doesn't seem enough for some older downsizers or VI on here. If you think equity release should be a lower rate... set up our own equity release company. We need to ensure the oldies on all that HPI treat houses as cash machines, at low rates.

At 40 how long till I might need care too, with no long-wave then 0.5% £$Trillions of QE reflated house to tap for the care fees. I'll ask my landlords for a cash back eh, booking in at this £25K a year care home place.

It's a real shame that older people don't downsize and allow younger people with families to buy their homes

However much of the reason for this can be laid at the governments door in terms of stamp duty, 20% VAT on everything and moving costs

My widowed neighbour downsized from a 4 bed house to a 2 bed bungalow and thought she would free up about £75,000 (she is aged 54 and still working)

By the time she had paid all costs, fees , removal vans , and the cost of new curtains etc at the new home she only free'd up about £48,000 and wishes she had stayed put

Also the house she sold had a new boiler and completely refurbed central heating system - it now looks like she will have to spend out thousands more in the new place quite soon to replace the boiler

There are many hidden costs to moving house that is why many outright owners stay put.

It is expensive to downsize. Moving down incurs all the moving costs associated with moving up. Selling a £1m property to move into a £600K property will cost over £40K when all fees and taxes are considered. In effect you lose 10% of the potential gain. I don't believe people are refusing to downsize, it's just that they lack any incentive to do so.

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Over-55s?

Only a privileged few 55-65-year-olds are retired. But rather more of them have young-adult children. I expect that money is mostly funding university and house purchases.

My next-door neighbours are (or at least look) younger than that, but they bought their 19-year-old daughter a house last year. That's an inheritance brought forward to an age where she benefits from it!

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Edit just to say I'm not defending it. Equity release is a bad deal and people would be better selling up entirely.

Not necessarily. Could be ideal if you don't want the hassle of moving but do want your money for spending. Of course it'll wipe out your estate on your death, but you can't take it with you!

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Edit just to say I'm not defending it. Equity release is a bad deal and people would be better selling up entirely.

I wouldn't really agree with selling up being a better idea. My house would have a rent/price of about 5% so if I sold I could rent a place for 20 years with the money. To make it worth while I would need to sell up and start renting 10 years before I die. Not knowing when that will be I guess I would have to sell up when I am 80 that's if I live that long.

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Not necessarily. Could be ideal if you don't want the hassle of moving but do want your money for spending. Of course it'll wipe out your estate on your death, but you can't take it with you!

I ought to have qualified my previous comment by saying 'people would mostly be better selling up entirely'. That way they get access to the 65% of the proceeds that the equity release chomps through.

You can't take it with you, of course, but that doesn't make it sensible to hand it over to a financial company in your twilight years and accept a compromised standard of living (limited by the 35% LTV) either. If people are willing and able to sell and move they ought to have much more to spend.

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I ought to have qualified my previous comment by saying 'people would mostly be better selling up entirely'. That way they get access to the 65% of the proceeds that the equity release chomps through.

You can't take it with you, of course, but that doesn't make it sensible to hand it over to a financial company in your twilight years and accept a compromised standard of living (limited by the 35% LTV) either. If people are willing and able to sell and move they ought to have much more to spend.

More of the selling should also begin to put pressure on prices too, beginning at low-mid-prime end, and then later equalising to lower-mid average end of market.

Equity release must be expensive for a reason. How many people here would run a company lending someone £50K-£100K against their house, at a low rate, with no repayment income stream coming in on that loan/debt, when debtor can take option settling it at any point, or waiting out for years. Plus other risks. It has to be at a premium rate for many a reason, including missing out on other opportunities for capital, and perhaps because of HPC risks, and regulatory/legal compliances + employing people.

Equity release allows individuals aged 55 and over to release money from the property they live in without having to make any monthly repayments. There are two types of equity release; Lifetime Mortgages and Home Reversion plans. Both of these are regulated by the Financial Conduct Authority. By using an equity release product, a home owner can draw a lump sum or regular smaller sums from the value of their home, while remaining in their home.

Equity Release Council: http://www.equityreleasecouncil.com/what-is-equity-release/

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