Nationwide is looking at ways to allow older customers to release equity from their homes so they can help their children get on the property ladder or pay for health care. A spokesperson for Nationwide said the Society was exploring ways to not only help people get onto the housing ladder but also provide the flexibility […]
Nationwide is looking at ways to allow older customers to release equity from their homes so they can help their children get on the property ladder or pay for health care.
A spokesperson for Nationwide said the Society was exploring ways to not only help people get onto the housing ladder but also provide the flexibility for older borrowers to stay in their properties longer while at the same time help them make the most of their money.
Nationwide said in a statement: “A huge proportion of people’s wealth is tied up in their property. We recognise that many people would like to unlock some of that wealth and access that income later in life but be able to continue to stay in their home.
“This is a real customer need and something we are exploring. The challenge is to do it in a clear, simple, safe and secure way. To be clear though this is still at concept stage and is in research and development and so it is too early to talk about any potential products or possible timings.”
You can use equity release to gain access to the wealth tied up in your property without having to sell or move home. It is designed for older homeowners who own their property outright or have relatively small mortgages to pay.
It is possible to borrow against the value of your home, sell it or part-exchange it for a lump sum or a regular monthly income.
A lifetime mortgage is a long-term loan which you can use to extract your funds in a single lump sum or in smaller amounts over time through what is known as drawdown. Home reversion plans allow you to access all or part of the value of your property while retaining the right to remain in it rent free.
Alice Watson, from Retirement Advantage Equity Release, said: “Nationwide is right to say that developing products which are safe and secure is important.
“However, the truth is the equity release market already offers a raft of products which provide safety, flexibility and comfort to customers. Interest only lifetime mortgages allow customers to choose how much to pay each month, and for how long.
“This means they can significantly reduce or eliminate the impact of it rolling up, and it provides peace of mind that the loan balance won’t increase over the years. Or there are interest and capital repayment options where customers can repay up to 10% of the initial loan amount each year without an early repayment charge. Customers can even bolt on additional features like cash reserve facilities, or inheritance guarantees.”
A record amount of housing wealth was unlocked by homeowners in 2015 of £1.61 billion through equity release plans.
According to the Equity Release Council, equity release lending was up 16% from £1.38 billion in 2014, with homeowners taking out £961 million through drawdown.
More than 22,500 new plans were agreed last year, the highest number since 2008.
Annual equity release lending has more than doubled in the last four years and now exceeds its pre-recession peak of £1.21 billion by 33%.
Dean Mirfin, technical director at Key Retirement, said: “It is good to see the acknowledgement from Nationwide of the increasing role that parents and grandparents have in helping their children and grandchildren get onto the property ladder, which is a popular use for equity release.
“The mention that products will have no negative equity guarantees is no different to those currently available through the Equity Release Council, which already carry the same guarantee.
“The issue about existing schemes being viewed as expensive also comes at a time when for many rates less than 5% fixed for life are available as well as a variable rate option priced currently at 2.96%. As a result it will be interesting to see the structure of what Nationwide proposes against those currently available as well as to how they will be distributed.”
