Equity release lenders pulled more than 70 per cent of lifetime mortgage deals in the wake of last year’s ill-fated mini-Budget as experts warn the later life lending market “has collapsed”.
Equity release – where you don’t pay off interest for the mortgage each month, instead paying it all off when you sell the home – is popular with people looking to release cash from their homes without selling. They have been controversial in the past as costs can mount up as the interest compounds, but became more popular in recent years as rates came down and providers were more transparent about the expense.
Despite rates falling back under 7 per cent since October as markets have stabilised, funding hasn’t returned. Yesterday the Bank of England raised the base rate by another 0.5 per cent taking it to 4 per cent, the highest it has been in 14 years, sparking fears that lifetime mortgage rates will rise even higher.Lifetime mortgages have soared in popularity over the past decade, thanks to record low interest rates and considerable house price inflation.
You are then charged 3 per cent interest on that balance, meaning you owe £106,090 at the end of the second year. At the end of 10 years the outstanding balance would be £134,392.The cheapest rate on the market is currently 5.06 per cent from Legal & General, meaning a £100,000 lump sum taken today would accrue £5,060 in interest in the first year.
“We recently had a client who had no hot water or heating due to a broken boiler in the middle of a cold snap, and she didn’t qualify for any government help. Despite the eyewatering cost, there will still be some homeowners whose wealth is locked into their home and a lifetime mortgage is the obvious way to release some cash to supplement stretched incomes.Should you hold off and see if lifetime mortgage rates fall?
There is also no need to make repayments and no risk of repossession, making them attractive to borrowers who aren’t worried about leaving an inheritance.“Don’t rule it out automatically, don’t rush into it by default, get advice from a qualified adviser who will help you consider all your needs and options, and talk it through with your loved ones.
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Source: i newspaper - 🏆 8. / 89 Read more »