FINANCIAL ADVICE CENTRE NEWS
Your Winter Newsletter 2022
Mortgage and Property News
Later life lending and mortgages in retirement
Since the start of the pandemic our Mortgage Team have seen a significant increase in queries from clients relating to later life lending and mortgage options for the over 50’s, as well as lifetime mortgages (formally known as equity release). Many of these queries relate to those looking into tax efficient ways to obtain funds to
help children and grandchildren with house deposits, student fees, weddings, and other major life events. These days it’s also not uncommon for people to purchase properties later in life.
Given the introduction of several products designed for a previously neglected demographic of borrowers over the last two years, the market is clearly responding to this national demand. Our Head of Mortgages, Niamh Byrne has provided some insight into the kinds of products available.
Please contact Niamh for further information or to discuss your personal circumstances and options.
What is a lifetime mortgage?
The most popular product designed to release equity from property in the UK for those aged 55 and over is a lifetime mortgage. Unlike the equity release plans of the past, modern plans feature several customer-facing safeguards.
These protections mean that you and your partner are guaranteed to remain the sole owners of your home while having no obligation to make monthly payments.
There are plans available that allow you to release as little as £10,000 tax-free, while creating a further reserve fund. Others will allow you to ring-fence a portion of your home’s value, protecting it as a guaranteed inheritance for loved ones. You can even fix the interest rate on your lifetime mortgage for life, so that you can understand exactly how much you will owe over time.
Naturally, as a lifetime mortgage involves accessing some of your property wealth now, there will be less available to you and your beneficiaries in the future. It could also affect your entitlement to means-tested benefits.
Our Mortgage Advisers can help you to strike a balance between your current wants and future needs. If you own your home and want to access your wealth in a flexible and safe way, then a lifetime mortgage could be for you.
A lifetime mortgage allows you to release tax-free cash from your home and benefit from the knowledge there are no required monthly payments and remain the owners of your home. Instead of contractual monthly repayments, the interest owed on the loan will compound and need to be repaid by sale of your property on your death or movement into permanent residential care.
There are several options available to clients:
Roll up lifetime mortgage: You can release a tax-free cash lump sum from your home. There are no required monthly payments to make, with the interest being added to the mortgage monthly and rolling up over time.
Drawdown lifetime: Release an initial lump sum, while creating a reserve fund that can be drawn down at a later date. Interest is not charged on the reserve until it has been accessed, so this can be a good option to reduce the impact of interest roll-up.
Flexible features: Most products, whether roll-up or drawdown, will come with a variety of optional features designed to increase the flexibility of your borrowing. One of the most popular features is flexible payments, usually allowing you to make optional payments of This can be particularly useful if you wish to safeguard any future inheritance for your loved ones. A “No negative equity guarantee” means that you, or more specifically your estate, will never owe more than the property is worth when sold.
50+ Residential Mortgages
These products are specifically designed for people over the age of 50 where many mainstream mortgages may be unsuitable or not applicable due to age limitations.
Specific mortgage products for this time of life are created with a set term duration. Customers can opt for interest
only, they make interest payments monthly but must demonstrate there are sufficient means to repay the mortgage at the end of the term. This could be through sale of property (either a main residence usually by downsizing, or a second home) or cashing in investments or assets.
Where customers opt for a repayment mortgage and make all of the payments, the mortgage will be repaid at the end of the term.
As with all mortgages, providers take several sources of income into account in assessing affordability.
For 50+ mortgages these include:
• Pension income (SIPPs, DB or DC private pensions, as well as state pension)
• Sale of the property when downsizing
• Sale of other properties owned
• Sale or maturity of investments, including any endowments or lump-sums entitled to when taking a pension.
If you are interested in these, please get in contact with me to discuss your options and deciding which one suits your financial position better. Together with our Mortgage Team we can pull you together a proposition to best suit your needs.
Property ‘catfishing’ – new word, old trend?
Catfishing – it’s a term from the online dating world referring to somebody who presents themselves somewhat differently online to when you meet them in person. And it seems that a lot of prospective homebuyers are suffering the catfishing experience at property viewings, too.
An unpleasant surprise
A recent survey1 of homebuyers suggested that the vast majority (71%) of homebuyers were catfished by a property during their search. The most common issue was a property that was much smaller than it appeared in photos, while poor build quality frequently led buyers to believe a property wasn’t worth the asking price. Buyers were also disappointed by properties that looked more outdated than they’d expected, as well as tiny rooms being advertised as extra bedrooms.
Do your research
To avoid disappointment, try doing some extra research rather than relying on the estate agent’s photos alone. A floor plan can give you an idea of the actual size of each room, while a street view tool could help you get a more realistic view of the state of the property. 1MoveStreets, 2021
Half of all first-time buyer transactions were supported by the Bank of Mum & Dad (BoMaD) in 2021, according to analysis2. BoMaD contributions of £9.8bn helped 169,000 first-time buyers onto the housing ladder. Surging BoMaD contributions could become the norm, analysts suggest, after Help to Buy is withdrawn completely from March 2023 onwards. 2Savills, 2021
Almost half of people (49%) have never remortgaged their home according to research3, despite the average Briton having held a mortgage for over 13 years. By failing to consider their mortgage options, for example, securing a fixed term instead of a variable rate, just under a third (32%) know it could probably save them money. 3Barclays, 2021
Slowing activity but demand remains high
New buyer enquiries rose slightly in the Royal Institution of Chartered Surveyors’ (RICS) November survey, with a net balance of +13%, while new instructions fell for the eighth successive month to -18%.
The end of the Stamp Duty holiday, among other factors, has contributed to a dip in housing market activity, with Q3 recording a 26% fall in purchases compared to the previous quarter, according to UK Finance data. Despite this, Q3 purchases remained 10% higher than their 2019 equivalent.
The largest growth in the recent data came in the rental market, with rent increases at a 13-year high. Average rent, excluding London, now stands at £809 per month, according to Zoopla’s latest Rental Market Report.
Tenant demand returned a net balance of +48% in November and RICS foresees further upward movement in rent prices because of this demand and a shortage of rental properties. The rental market is currently strongest in the central zones of major cities, where demand is twice as high as in outer zones.
House prices headline statistics
Average monthly price by property type - Oct 2021
Price change by region