Next Mis-selling scandal looms

thrifty_pete

Malthusian wrote: »

Or is the idea that if all the selfish oldsters sell their 4-bed houses, the price of 4-beds will decrease to the level at which the family can afford to buy one? That would make it completely pointless for the oldsters to sell, because they won't release any capital.

It is not about capital and making money, homes are to be lived in, not a tax free speculation and wealth redistribution scheme. If our economy is going to stand on its own two feet after Brexit, we will have to find a way of supporting the "oldsters" without using a property market bubble to finance it. We've been living on tick for far too long. People will have to start saving and investing more for their retirement, and paying more tax to financial social care.

coyrls

thrifty_pete wrote: »

It is not about capital and making money, homes are to be lived in, not a tax free speculation and wealth redistribution scheme. If our economy is going to stand on its own two feet after Brexit, we will have to find a way of supporting the "oldsters" without using a property market bubble to finance it. We've been living on tick for far too long. People will have to start saving and investing more for their retirement, and paying more tax to financial social care.

Brexitiers already searching for scapegoats?

Malthusian

thrifty_pete wrote: »

It is not about capital and making money, homes are to be lived in, not a tax free speculation and wealth redistribution scheme. If our economy is going to stand on its own two feet after Brexit, we will have to find a way of supporting the "oldsters" without using a property market bubble to finance it.

How do you intend on persuading the oldsters to stop rattling around in their 4 bed houses and swap places with the more deserving young family if they aren't going to make any money by trading down?

Gunpoint?

Onesipherous

I am a retired financial adviser. Once asked by a client to advise on Equity Release. After researching all the available plans I had to advise him against Equity Release. If he wanted to proceed, it certainly wasn't going to be through my agency. I wasn't prepared to risk my reputation. In my view, Equity Release is one of the biggest con tricks going. Don't touch it. Since I retired an elderly former client has entered into equity release, releasing half the value of his home. In less than a year £18,000 of interest has accrued. He would have been better to have taken out an interest only mortgage at 3.99% offered by one of the northern building societies, and kept up interest payments from his pension, rather than letting it roll up at a ridiculous compound rate through equity release. My advice - don't touch equity release unless you are absolutely desperate. Downsize first. Take an interest only mortgage specifically marketed for the elderly - there is at least one currently available. Do the maths.

Zanderman

Onesipherous wrote: »

....an elderly former client.....He would have been better to have taken out an interest only mortgage at 3.99% offered by one of the northern building societies, and kept up interest payments from his pension, rather than letting it roll up at a ridiculous compound rate through equity release....

Are you sure mortgages are available to the elderly?

dunstonh

Since I retired an elderly former client has entered into equity release, releasing half the value of his home. In less than a year £18,000 of interest has accrued.

Interest is normal on debts. That should not be a surprise.

He would have been better to have taken out an interest only mortgage at 3.99% offered by one of the northern building societies

And which building society would that be?

and kept up interest payments from his pension, rather than letting it roll up at a ridiculous compound rate through equity release.

He can still pay down the debt on an equity release mortgage. Modern Equity release is far more flexible than legacy equity release.

My advice - don't touch equity release unless you are absolutely desperate.

It is generally considered as an option of last resort.

Downsize first.

Not always easy. By the time you pay stamp duty and other costs of moving, you rarely get an amount that is worthwhile.

Take an interest only mortgage specifically marketed for the elderly - there is at least one currently available.

Lots of lenders will lend to those that can repay the mortgage through pension. However, interest only? Which lender is doing new interest-only mortgages for residential borrowers?

Linton

dunstonh wrote: »

.....


Lots of lenders will lend to those that can repay the mortgage through pension. However, interest only? Which lender is doing new interest-only mortgages for residential borrowers?

???

Several companies do interest only lifetime mortgages where the capital is repaid when the house is eventually sold. What is the benefit in dying with £n00K tied up inaccessibly in bricks if there are no dependents or other relatives with justifiable expectations of a large inheritance? Also I guess it will relieve the executor of the hassle of selling the house.


Like any debt ER can be dangerous for people who desparately need the money, but for those that dont it seems a useful financial management facility.

dunstonh

Several companies do interest only lifetime mortgages where the capital is repaid when the house is eventually sold.

Indeed they do. It is called equity release. it is just one of the variations that exist today. However, the previous poster was saying those mortgages are the next missale. He was saying they should take out residential interest-only mortgages instead. Not equity release.

reeac

Onesipherous wrote: »

I am a retired financial adviser. Once asked by a client to advise on Equity Release. After researching all the available plans I had to advise him against Equity Release. If he wanted to proceed, it certainly wasn't going to be through my agency. I wasn't prepared to risk my reputation. In my view, Equity Release is one of the biggest con tricks going. Don't touch it. Since I retired an elderly former client has entered into equity release, releasing half the value of his home. In less than a year £18,000 of interest has accrued. He would have been better to have taken out an interest only mortgage at 3.99% offered by one of the northern building societies, and kept up interest payments from his pension, rather than letting it roll up at a ridiculous compound rate through equity release. My advice - don't touch equity release unless you are absolutely desperate. Downsize first. Take an interest only mortgage specifically marketed for the elderly - there is at least one currently available. Do the maths.

I agree with your suggested order of priorities. We downsized....by a factor of 3 financially by selling a big posh house in what had become a boom town with all the associated traffic problems to a new smaller place with plenty of land and a very pleasant environment. The arguments about greedy children wanting their inheritances and about dreaded stamp duty sound like justifications dreamed up by the ER marketing people. The big issue is the COStS associated with ET.

dunstonh

The arguments about greedy children wanting their inheritances and about dreaded stamp duty sound like justifications dreamed up by the ER marketing people.

The difference between a 4 bed estate style house and 2 bed estate style house is about £80,000 in our area. Factor in the costs of moving and stamp duty and you do not end up with much.

A lot of people who plan to downsize suffer a reality check when it often means having to go from a nice area to a poor area with low standards and higher crime or just seeing the reality of a tiny bedroom and living rooms compared to what they have.

Downsizing can be an option but its not an option for all. You are very naive if you think it is suitable for everyone.