Independent Financial Life Planners Bishop's Stortford: Record number of pensioners using homes as 'cash machines' to fund retirement

Tuesday, 11 August 2015

Record number of pensioners using homes as 'cash machines' to fund retirement

Enable’s IFA’s in Bishop's Stortford know that may older folk are looking at every option when it comes to financing their retirement. According to one recent report older homeowners borrow £4.2m a day using equity release to bolster income. Equity release is a loan that is repaid as capital plus interest, when the borrower ultimately sells their property, typically upon death or if they move into a care home. More than 5,400 over-55s used "equity release" to borrow a record £384m against their homes between April and June this year which is 18pc up on the preceding three months and 11pc on last year. The typical borrower releases £68,500 from their home, increasing to £143,000 in London.

But these loans can be hugely expensive because the longer you live, the more interest accumulates, and there are no repayments being made to reduce the debt. Interest rates for these kinds of loans tend to be higher than for traditional home loans, at around 5pc to 7pc. But it is easy to see why cash-poor but property-rich pensioners go for this option. Nigel Waterson, chair of the Equity Release Council, said: "The average pension pot is around £25,000 - just half the amount of money people take out with equity release," he said. "Clearly pensioners have a gap in their income and property is a valuable source of wealth.”

Regulation of these loans was introduced a decade ago but many policies sold in the 80s and 90s were completely unsuitable and meant homeowners paid back sums that could quadruple the amount originally borrowed. Regulations now mean that borrowers must have financial advice before signing a deal, which must also be approved by a solicitor. If you want advice on better ways to fund your retirement Enable’s IFA’s in Bishops Stortford might be able to help.

Issued by: Enable Independent Financial Life Planners  25c North Street, Bishops Stortford, Herts CM23 2LD Telephone: 01279 755950 - Fax: 01279 657339  Enable Independent Financial Life Planners is a trading style of Enable Independent Limited is authorised and regulated by the Financial Conduct Authority. It is important always to seek independent financial advice before making any decision regarding your finances. If you would like any assistance, please contact us. NOTHING CONTAINED IN THE ARTICLES SHOULD BE CONSIDERED AS GIVING INDIVIDUAL FINANCIAL ADVICE

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IFA Bishop's Stortford

At Enable Independent we know that our clients trust us and rely on our advice to help them to plan a better, more secure financial future. This is a responsibility that we take very seriously especially because we know that many clients have chosen us on the recommendation of friends and family. Each one of our advisers has deep expertise in their area of specialist knowledge and, as a team, we hold some of the highest qualifications available in the financial advice industry.

Our job satisfaction comes from using our skills to find workable, affordable and flexible solutions to meet our clients needs. Whether we are planning for known future funding requirements such as house purchase, school fees or income in retirement - or for the unforeseen such as job loss, long-term illness or early death, our independence from any product provider enables us to view the marketplace impartially. Our training permits us to look beyond a product's marketing hype and select on the basis of its fitness for purpose.