Equity Release Could Help Combat Rising Bad Credit Card Debt
An equity release plan could help increasing numbers of homeowner’s clear bad credit card debt. According to Price Waterhouse Coopers (PwC), bad credit card debt could rise by 3% next year with many homes expected to have £10,000 worth of unsecured debt.
Last month Age Partnership revealed that 46% of equity release plans taken out by their customers were done to clear debt. Of these 18% were repaying unsecured debts.
Equity Release Plans - One Way to Reduce Bad Credit Card Debt
According to PwC bad credit card debt could grow to 9% by the end of next year. They reported that UK consumers are borrowing less than before the financial crisis and that the number of credit cards in circulation had been reduced by 8%.
However, they fear that bad debt will rise, claiming “bad debts in the sector have reached historic highs” and they will grow to 9% by next year.
An equity release plan is one way to reduce these arrears. Equity release schemes can unlock a lump sum or release cash through regular payments to supplement income in retirement. Lifetime mortgages are the most common equity release schemes as they offer a no-negative-equity guarantee.
Rising House Prices Could Boost Equity Release
Recent figures from the Nationwide suggested that house prices continue to grow, which would provide more equity for homeowners; a timely boost considering PwC estimate that the average household will have to spend 15% of its net income to cover interest on bad debts.
Richard Thompson, partner, Price Waterhouse Coopers LLP said,
“Our analysis suggests that bad debts are likely to continue to rise and could reach 9% by the end of 2010. This would have enormous implications for the profitability of credit cards in the UK market.”
By consolidating your existing unsecured debts, you may extend the term and overall cost of these debts.
For no-obligation advice on whether equity release could help you and information on the best plans please call our 24 hour helpline and speak to one of our advisors:
Or use the comments box below to ask a question.
Equity Release may involve a Lifetime Mortgage or Home Reversion Plan. To understand the features and risks ask for a personalised illustration.
Age Partnership provides initial advice at no cost and without obligation. Only if you choose to proceed and your equity release case completes would a typical fee of 1.5% of the amount released or £795 be payable.
Important things to consider about equity release:
- Equity release could affect your current or future entitlement to means-tested benefits
- Releasing equity to spend in your lifetime can reduce the amount that is left in your estate when you pass away
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