Before equity release was incarnated, the options available for older homeowners to land some much needed extra cash without downsizing to a lesser property were limited.
But recent changes to the legal aid system in Britain have perhaps given equity release a new role, as another option for desperate homeowners.
According to Greenwich Housing Rights, the government’s proposed legislation changes could mean that solicitors are reluctant to take on long-term legal aid cases.
The charity, which specialises in providing free legal advice to people with housing problems, believes the legal aid changes could cost people their homes.
From October, no matter how long a case lasts, a legal adviser will only be paid a standard fee by the government.
Matt Ventrella, manager of Greenwich Housing Rights, told newshopper: “Our fear is there will be no reason for lawyers to take on difficult cases if they won’t be paid for them.”
“More people will risk losing their homes if they cannot get legal help. We take on a lot of legal housing emergencies, both at court and in our office, but there’s no way we could help everyone if more solicitors drop out of legal aid.”
However, help could be at hand, as equity release is one option homeowners might turn to in order to avoid repossession.
National Homebuyers offer quick property sales solutions, with schemes which allow people with financial troubles to sell their home to the company to free up much needed capital and then rent them back.
A statement on the firm’s website revealed: “More and more people want to release equity in their homes whilst wishing to continue living in the property.
“Equity release schemes are usually aimed at the elderly, are extremely complicated and are not always financially beneficial. This solution from National Homebuyers is a simple, effective and stress-free solution.”
Director Chris Newman added: “With repossessions at an all-time high because of interest rate rises, the impact of the law change will be devastating for some, who are not in a position to seek help when faced with financial difficulty.
“Our sell and rent back solution is designed to help people release equity in their home, while remaining living there as a tenant.”
The National Homebuyers’ sell and rent back product allows someone to sell their home for up to full market value and rent it back on an assured short-hold tenancy agreement.
Equity release offers many elderly couples the chance to clear debts they have built up earlier in life in retirement.
According to Dean Mirfin, a business development director at advisers Key Retirement Solutions, around one in three homeowners opt for equity release to meet the cost of bills or repay debt.
“You’ve got a considerable number who still have mortgages into retirement and also a lot with credit card debt and loans, which obviously impact very heavily on their income,” he commented.
However, Mirfin did suggest that there was a changing perception to equity release schemes, which is making them more mainstream.
“One of the big things that’s changing is that if you went back nine years ago, when we first started advising in this market, it was very much seen as something that if you did it, you didn’t necessarily tell anybody else you’d done it, because a lot of people saw it as being a ‘desperation’ purchase,” he explained.
Instead, he revealed that the majority of people were doing it as a ‘lifestyle choice’, stating that one in three were using the money for holidays and enjoying the money they were freeing up.
“There’s been quite a change in why people are doing it, but also the other considerable change as well has been the fact that people are more than happy to tell others they’ve done it,” he continued. “And that’s really spurring the market and that’s really making it more mainstream.”
Mirfin said that lifetime mortgages accounted for 90 per cent of the market, adding that drawdown plans, where homeowners can take funds as and when they wish, were proving immensely popular.
