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Equity Release Will Destroy Value, Homeowners Warned

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The Times January 05, 2006

THOUSANDS of vulnerable homeowners are being lured into high-risk equity release schemes that will destroy any value in their homes, according to a damning report published today

IMO these schemes will bring the market to a crash even quicker. When the old dears pass away there will be no inheritance to allow the FTB's to get on the ladder. Mr bank will step in and say "Thats MINE muahahahahaaaa"

Some justice for the poor bugger wiping Grannys **** hoping for a nice pay off when the day arrives...

http://business.timesonline.co.uk/article/...1970646,00.html

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Love this:

'Norwich Union denied the accusation that its advertising was irresponsible. Darren Carter, marketing director for Norwich Union Personal Finance, said: “The criticism is misrepresentative of our approach to selling equity release products. Since we entered the equity release market in 1998 we have been very pro-regulation, and we do not sell to anyone without going through a detailed advice process.”' (from the Times article)

So, OK, nothing at all to do with their schemes are bad value for money, all they're concerned about is that they can't be done for mis-selling. "A detailed advice process" - yeah, sure, but does this ever end with the phrase "this is a bad idea"?

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Equity release. That lovely sounding phrase that has so easily slipped into the language.

You gotta love the folks who dream such things up.

Sounds so painless, the nice lenders are helping you to get that lovely money "locked up" in your house.

It's a secured loan with interest due and the longer the term the more interest you pay.

I remember these things from the past and there were many horror stories.

Another case of lenders milking the last suckers?

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Equity release. That lovely sounding phrase that has so easily slipped into the language.

You gotta love the folks who dream such things up.

Sounds so painless, the nice lenders are helping you to get that lovely money "locked up" in your house.

It's a secured loan with interest due and the longer the term the more interest you pay.

I remember these things from the past and there were many horror stories.

Another case of lenders milking the last suckers?

Of course this is where massive HPI is kind of brushed aside. You house has doubled in value so why not release that equity of course you can now only buy half a house or leave your children half a house. :)

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Happy new year!

I have just received my Which mag? this morning in the post.

An interesting read (not that it applies to me).

As they say ................. Over 60 and worried your pension won't be enough to get by on? before you sign up for an equity release scheme read this............ (the article covers 4 pages)

"Equity release schemes should come with a warning"

Which says "we think it's irresponsible to advertise these schemes like this (they give an example of one by Norwich Union - dream holiday, new car, conservatory even a face lift).

They should be mainly as a last resort if you can't get by on your pension and savings and have no other options such as moving home.

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Some justice for the poor bugger wiping Grannys **** hoping for a nice pay off when the day arrives..

They'll get nothing.

People who look after our future (ie kids) and after those whom society owes (the elderly) get paid a pittance. If wages reflect our attitude then Kids are a nuscience (sp) and the elderly should just die.

Just quickly my missus is an early childhood teacher and would earn more money stacking shelves and I work in a retirement home and have people look down their noses when they hear my job.

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bulls often claim high interest rates did the last crash and that this time 'its different'.

by the levels of MEW i think the themeof this crash is going to be an equity release scam that brings them down. rather than high or moving IRs. they simply have lend loads hoping that HPI is accepted.

which it isnt. they went too high. lent too much. got too greedy.

this year is the year they will have to either SELL or PAYBACK those loans.

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A couple of days ago, somebody (moostea? -apologies

if someone else) put up some nice graphs of millions MEWED

over time.

It collapsed shortly before the last crash.

MEW relies entirely on a rising market, flat ones

don't work.

Guess what - it just collapsed again, here and in the US,

pundits reckon thsi will have an immediate effect on

consumption...

Here we go :D

ABB

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True, but once you've MEWED the 80% or whatever the limit is,

without further value rises, your 'credit line' is all dried up.

ABB

(Rereading that it ihas awful druggy undertones :( )

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Think this post had better be deleted as I am not a royal VIP and therefore new posts are above my station.

This site is becoming more of a joke than Rightmoves figures.

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WORKING LUNCH was talking about this issue today...

Believe it or not they SUGGESTED DOWNSIZING :

By selling an expensive home and buying a cheaper one with zero mortgage-

as a sensible way of coping with the empty nest and consequent need

for less space

a wave of the future maybe?

= =

"MEW relies entirely on a rising market, flat ones don't work."

Of course there is another factor: MEW-ing to buy more property is how

alot of BTL speculators got started

...now I realise why there are so many new build flats!!!!

.....but hold on,wait a minute........elderly people sometimes have difficulty with stairs,so why build flats???

....mr planning official has buggered it up again!!!

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I found this part particularly scary.

Home reversions

With a reversion scheme you sell a proportion of your home to the reversion company in return for a lump sum or income or both. You never receive the full market value for the portion of your home you sell — around 40 per cent of its full value isn't unusual, although it varies according to your age and sex.

So if your house is worth £200,000 and you sell half of it (worth £100,000), you could expect to receive only around £40,000. The older you are, the higher the percentage of its market value you will get. This is because the provider will probably get its money back sooner.

When your house is sold, the reversion company takes its percentage share of your home at the full market rate. So if your £200,000 home has increased in value to £300,000 when you die or go into long-term care, the reversion company will receive £150,000 (50 per cent) when the home is sold. The final cost to you or your estate in this example is £150,000 (£110,000 plus the £40,000 original lump sum you released).

Even if you sell 100 per cent of your home, you continue to have the right to live there. However, you are responsible for maintaining your home, and the reversion company may carry out checks to ensure you are doing so. Home reversion schemes are not yet regulated so you have no comeback if you are sold one inappropriately. Until they are regulated, they are best avoided.

Which.

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A point I haven't seen raised in this discussion is the need for older people to protect their assets.

My mother went into a care home and had to pay the full fees till her capital reduced to under £20,000.

She deteriorated and had to go into a nursing home fees about £450 per week. I thought she was going to die as she gave up eating but they kept her alive with nutrious drinks till in the end she was she so poorly she didn't even recognise me. Isn't that caring? She died just before Christmas, she was 6 stone.

So who benifited. She didn't, she wanted to die, the family didn't it, was very depressing to see her diminiss in every way. The care home did by 2 years fees. Am I cynical, you bet.

There was a news item about 2 years ago how private residents are subsidizing those paid by local authority funded residents and needed investigating but that went quiet.

So my response to equity release is if you haven't protected your house better to release the money and live it up rather than using the equity to pay for your care fees cos either way you haven't got it to pass on.

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Care homes have replaced the loving care an extended family would give whilst waiting for the older generation to die (and thus gain sole control of the house)

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as per usual, any 'equity release' that doesn't involve selling your house, is also known as a loan

by the way, the current interest rate charged by NU is over 7% per annum for releasing your equity! lol

Devil's Advocate:

The Equity Release Provider is exposured the risk of the value of the loan exceeding that of the sale value of the house. It this case they take the the hit for granny, and she can live in the house 'til she's 120 years old.

So they are exposed if:

i) if house prices tank some point in the future, below the future value of the loan

ii) if the policy holder lives too long, the value of the loan goes up beyond the value of the house

(edited for typo)

Edited by no accountant

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  • 338 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
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      • Even
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      • up 5%



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