Equity Release Addresses Interest–Only Timebomb

With a ‘standard’ mortgage term being 25 years, in 2032 — 25 years on from 2007 — there are said to be over 160,000 interest–only mortgages reaching maturity. Many of these 160,000 will now have a plan in place for how they will repay their debt, but there will also be those who are burying their heads and don’t have a repayment plan in place.

Know your options

The Financial Conduct Authority is urging people in this position and their lenders to tackle the issue sooner rather than later. There are options for paying off an interest only mortgage that don’t involve securing additional borrowing, such as downsizing to a smaller property.

The changing market

Equity release lenders have reacted to the interest–only ‘time–bomb’ by providing more product ranges and solutions that may be appropriate for a younger borrower, aged 55 to 60. Such as the recently launched ‘Just for you’ lifetime mortgage with an interest serviced option. With this plan the amount of interest that you accrue over the course of the plan isn’t as high as with a rollup lifetime mortgage, as you choose a percentage of interest that you will pay back. The percentage must remain the same for the length of the plan, but you do have an option of payment holidays.

By making repayments on the interest it makes a lifetime mortgage a more viable solution for younger borrowers aged 55 and over as the amount of interest on the debt is being reduced — by whatever percentage you choose to pay. The overall debt will increase for the percentage that you’re not paying the interest on.

There are many more high street names now offering equity release solutions, such as Nationwide and Sunlife. According to the Equity Release Council in 2016 there were 58 plans available, in 2018 there were 139, with this figure only set to grow further.

Get advice

Equity release isn’t something that should be entered into without knowing the full implications for you. An independent equity release advisor will explore all plan options with you, and will tell you everything you need to know about equity release.

Important Information — Equity Release

Equity release may involve a home reversion plan or lifetime mortgage which is secured against your property. To understand the features and risks ask for a personalised illustration.

As multi-award-winning equity release specialists we provide informative impartial advice covering your options as well as explaining how equity release will affect potential inheritance and how your entitlement to means-tested benefits could be affected now or in the future. We provide initial advice for free and without obligation. Only if you choose to proceed and your case completes would a typical fee of £1,795 be payable.

Age Partnership Ltd is authorised and regulated by the Financial Conduct Authority. FCA Register Number 425432. Age Partnership Ltd, 2200 Century Way, Thorpe Park, Leeds LS15 8ZB.