Tuesday, January 12, 2010

Forced into it by low savings rates?

More OAPs using homes to clear debt

"The number of pensioners unlocking money from their home to repay debt has tripled during the past year, research showed today. Around 35 per cent of retired people who released equity from their home during 2009 did so to repay non-mortgage debt, up from just 11 per cent in 2008, according to Key Retirement Solutions. But the most popular use for the money was to carry out home or garden improvements at 56 per cent, down from 60 per cent in 2008, while 33 per cent used the money to go on holiday and 25 per cent used it to treat or help family and friends".

Posted by alan @ 06:45 PM (1722 views)
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16 thoughts on “Forced into it by low savings rates?

  • The Equity release market is now under pressure and IMO will shrink – Prudential are pulling out of the market in the first quarter of this year and it will be interesting to see if the 3 remaining major players can continue. I see a paralell with the 125% residential mortgage market which saw the number of lenders diminish to zero following the collapse of NR.

    See http://www.ftadviser.com/FTAdviser/Mortgages/Products/EquityRelease/News/article/20091124/8c92ec52-d8ed-11de-99a4-00144f2af8e8/Equity-release-players-shocked-at-Prus-exit.jsp

    A decline in UK residential house prices will also signal the death knell of this option.

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  • And the problem with this is … ?

    The government has protected these people’s wealth for long enough – they bought their houses for 200 old pounds fifty years ago and now they are worth 2 million.

    Whassaproblem?

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  • Well what do they expect? It’s not like they can sell their organs.

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  • Wasn’t this the whole point of people’s homes being their pensions?

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  • Yes, Shipbuilder, exactly. This is the Thatcher agenda coming to fruition.

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  • 1945 + 65 = 2010…

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  • little professor says:

    Umm… don’t these doddery idiots realize that they are not ‘clearing ‘ any debt, but in fact taking out debt secured on their home?

    Seriously, some old people don’t deserve to have money.

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  • That’s a bit harsh lp. Some of them are skint and are hoping that the equity doesn’t run out before they die. It’s all rather desperate.

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  • brickormortis says:

    Perhaps, guys, these OAPs are releasing money to bail out their kids (again) and can’t tell the banks the real reason so they say they are doing something else!

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  • That’s a bit harsh lp. Some of them are skint and are hoping that the equity doesn’t run out before they die. It’s all rather desperate.

    Perhaps they should not have bought their grand children a nice new wimpy home…….

    All the money is being sucked up into the housing market vertex, which is still yet to crash……

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  • hpwatcher: Hardly any of them bought their children “a nice new wimpy home”. Most of them struggle to pay the bills so they resort to equity release. If they live too long they get repossesed and carted off.

    http://66.102.9.132/search?q=cache:4scjQ02dvwkJ:www.ageconcern.org.uk/AgeConcern/poverty-EU-response-270709.asp+uk+pensioners+medical+bills&cd=7&hl=en&ct=clnk&gl=ukwith medical bills

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  • Si – I think it’ll hit in 2012 (1946 + 65 + 1 for good measure).

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  • “The group said there had been a 17 per cent drop in the number of equity release plans taken out during 2009 to 21,305.

    It added that the amount borrowed also fell by 14 per cent to £1.02 billion. It attributed the drop to a combination of lower house prices and the reduced number of plans taken out, as well as the increased popularity of drawdown plans, which enable people to take their money in stages.”

    SO although the % s up – is the net figure up? Sure some of them may have done this but its 35% of the number of people not 35% of the aggregate value.

    At best this is just an unsurprising tidbit of information, at worst skewed stats which prove nothing.

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  • Flash. You won’t find much sympathy from some people on this site for anyone who owns their home, particularly if they are old enough to have cleared their mortgage debt. They are just classed as one of Mr Wadsworth’s awful ‘home-owner-ists’ who amassed their ‘wealth’ through an unfair system which deprives the younger generation.

    I used to feel like that too many years ago. I thought it grossly unfair that my father paid a measly £5600 to have an architect designed four bed detached house built which was costing him a fixed 5%pa mortgage. Whereas I, earning a fraction of his salary, had to pay many multiples of that price and soon ended up paying 15%pa.

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  • So, do I understand this correctly. At one end of the scale, low interest rates are helping home owners, at the other end, low interest rates are punishing/hurting home owners?

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  • p.doff

    I have had similar thoughts, which is why I came to this site. As always there is truth to both sides of the coin but I am always wary of fanaticism. The smug NIMBYs of this world deserve some stick but there are plenty of more humble pensioners in run down shit holes. I’ve seen plenty of damp crumbling houses (previously belonging to the recently deceased or equity released) that haven’t seen a lick of paint in thirty years.

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