Home equity release may cost pension firms billions

Graham_Devon

Which basically means that pensioners themselves face losses. Likely not the pensioners of today, either.

https://www.bbc.co.uk/news/business-44992836

UK pension companies may be harbouring billions of pounds of losses from home equity release loans, according to research seen by the BBC.

Under equity release, homeowners borrow money against their house's value and don't repay anything until it's sold.

That's fine for the borrower, but there are fears lenders have underestimated how much these loans could cost them.

At least one firm assumes house prices will rise 4.25% a year. If they don't, firms face losses - or even bailouts.

That last paragraph is quite stark. Assuming house prices will rise 4.25% a year in order for the firm to breakeven? Over a period of up to around 35 years? Scary!

And the problem? Well one of the groups providing such loans suggests that just changing the rules from hereonin to protect us all, could have us forcing the losses right now.

In other words, remove one single card, and it falls down.

My question is how did we get to this point?

westernpromise

It's being so cheerful that keeps you going, Graham.

ukcarper

I don't really understand this, they lend you half the value of your property charge you a higher interest rate than most mortgages and the worse they do is get your the value of your property when you die.

MPD

https://www.theguardian.com/money/2018/aug/09/billion-pound-bonanza-for-life-insurers-over-slowdown-in-life-expectancy-pension
You win some, you lose some.

Thrugelmir

MPD wrote: »

You win some, you lose some.

No different to insuring your house against fire. Somebody does benefit. Others see none.

Wait for markets to underperform for an extended period. Then there'll be cries of anguish. Unlike the endowment era. People will only have themselves to blame. If they made the wrong decisions.

lisyloo

Perhaps the couple in the case study think they are being clever by spending all their money.
If either need long term care then they'll be living in OverMyDeadBody Grove and not necessarily together.

Thrugelmir

lisyloo wrote: »

Perhaps the couple in the case study think they are being clever by spending all their money.

Their money. Their choice. Perhaps no dependents and would like to enjoy the next few years.

lisyloo

Having visited some of these places I think they might later regret that choice.


It's nothing to do with dependents, it's about being cold, possibly seperated from your partner and sitting in urine/faeces with dressings hanging off your ulcerated legs (none of that is exaggerated).



You are right it's their choice, but I would regret it if I was split up from my husband.

Thrugelmir

lisyloo wrote: »

Having visited some of these places I think they might later regret that choice.


It's nothing to do with dependents, it's about being cold, possibly seperated from your partner and sitting in urine/faeces with dressings hanging off your ulcerated legs (none of that is exaggerated).



You are right it's their choice, but I would regret it if I was split up from my husband.

What % of people end their lives living in a care home?

lisyloo

Thrugelmir wrote: »

What % of people end their lives living in a care home?

If they get to be 65 the 40% (each), although I believe that include people who come out so not necessarily "end their lives"