As of Thursday 22nd June 2023, the Bank of England implemented another interest rate hike, bringing it to 5% from 4.5%. This significant increase marks the 13th consecutive rise, putting additional financial strain on homeowners with variable mortgages. The surge in monthly payments continues to be a cause for concern for many, especially those on fixed incomes or nearing the end of their interest-only mortgage deals.
Fortunately, for individuals aged 55 and over, there is a potential solution to ease this financial burden - equity release. By considering equity release, homeowners can replace their existing mortgage and have the choice to either cease or make reduced monthly repayments. This article explores how equity release can offer relief in the face of rising interest rates.
Understanding Equity Release
Equity release enables homeowners to access the equity in their homes without having to sell the property. It allows individuals to borrow atax-freee cash lump sum based on their age, property value and even their health. Equity release is a mortgage secured against the property, and the loan is typically repaid when the property is sold, either after the last homeowner's passing or after they’ve moved into long-term care.
The Appeal of Equity Release for Those Struggling with Mortgage Payments
With rising interest rates, many homeowners find themselves grappling with increased monthly mortgage payments, leaving little room for discretionary spending. This predicament can be particularly daunting for those approaching retirement or already in retirement. Equity release offers an attractive alternative, allowing customers to replace their current mortgage with a lump sum equity release plan. Consequently, they gain the freedom to choose whether to make monthly repayments and determine a comfortable repayment level.
How do higher interest rates impact loved ones?
Higher base rates not only affect individuals aged 55 and over but also have implications for loved ones. As interest rates rise, the financial burden on older family members can impact the entire family. Increased mortgage payments and potential financial strain may limit the ability to provide financial support to younger generations, contribute to education expenses, or help with major life events. The stability and financial well-being of the older generation directly influence the opportunities and support available to their loved ones, making it vital to explore viable options like equity release to mitigate the impact of higher rates and preserve intergenerational financial security. Other factors such as decreasing house values can also have an impact which you can read about in our article here.
Managing Finances on a Fixed Income: The Benefits of Flexible Repayment Options
For retirees living on fixed incomes with outstanding mortgages, equity release could be especially beneficial. Unlike conventional mortgages, lifetime mortgages (the most popular form of equity release) do not require proof of income or affordability checks, eliminating the obligation for mandatory payments. Homeowners have the flexibility to make voluntary repayments usually up to 10% per annum of the borrowed amount, helping to control the overall cost of the loan. It is important to note that any existing mortgage must be repaid on completion of the equity release plan.
Weighing the Risks and Finding the Best Deal
While equity release presents a viable option for homeowners struggling with monthly mortgage payments, it is not without its risks. Thorough research and exploring various options are crucial. This is where smartER, the only live customer research tool, can be invaluable. It provides accurate rates and precise amounts based on individual circumstances, allowing you to find the best products and deals available, including exclusives with Equity Release Supermarket that you won’t find anywhere else.
Seeking Professional Advice and Ensuring Suitability
Equity release is an advised product regulated by the Financial Conduct Authority (FCA). Therefore, consulting a financial adviser is essential for anyone considering accessing equity from their home. To ensure the most suitable product, it is crucial to speak with a whole-of-market adviser who is independent of any specific lender. Equity Release Supermarket advisers, known for their independence and comprehensive market knowledge, can provide expert guidance tailored to individual needs.
Maintaining Quality of Life with Equity Release
For those facing financial challenges due to increasing mortgage payments, equity release offers much-needed relief and the ability to remain in their homes, preserving their quality of life. However, it is imperative to conduct thorough research, consider the risks and benefits, and consult with a financial adviser before making any decisions.
Equity Release Supermarket are independent of any specific lender, always whole of market, and have access to exclusive products through smartER that you won’t find anywhere else. Their advisers are telephone based or can be seen locally. They are fully qualified members of the Equity Release Council and take the time to understand your circumstances. There are no fees unless you decide to take an equity release loan and you’re under no obligation to go ahead.