mis-sold equity release

mabelmb54

My parents got a lump sum (£14,000) from their property 20 years ago on a non repayyment mortgage the amount they now owe is over £100,000. This was done through a solicitor, does anyone have experience of mis-sold equity release compensation

Dan_Collins_2

20 Years ago, I am not sure who to complain to or if you have a complaint. Try the FOS to start with and they will put you in a direction. Dont be shocked if you have no complaint. They may have moral issues but that is how they work.

dunstonh

mabelmb54 wrote: »

My parents got a lump sum (£14,000) from their property 20 years ago on a non repayyment mortgage the amount they now owe is over £100,000. This was done through a solicitor, does anyone have experience of mis-sold equity release compensation

Why do you think it was mis-sold?

To be honest, I am sceptical at posts like these because the usual motive is the son/daughter isnt happy about losing their inheritance despite the parents having valuable capital provided to them to enhance their lifestyle.

Modern equity release products are better than those of 20 years ago but thats the case for nearly all products (financial or otherwise). The principle hasnt changed though. If you equity release, the interest is added and compounded and if you live a long time you could find the balance owing grow significantly.

The fact it was done through a solicitor increases the liklihood of things being done correctly.

Gorgeous_George

I read it that they have had a £14,000 loan for 20 years and not made any repayments.

If that is right, the interest rate is a modest 10.3%. If anyone should be sued it is your parents' maths teachers.

GG

dunstonh

10.3% p.a. average over 20 years would be about right as the rates were of course higher in the 90s than currently. Plus, you dont get discount/fixed rate deals on equity release artificially lowering the rate.

In 1988 the average house price was £57,245. It was £183,959 at the end of 2007. So, the property has increased by an average of just over 6% p.a. whilst the interest paid has exceeded that at around 10.3% p.a. So you would expect the debt to grow faster than the property value.

jamesd

In 2006, £14,000.00 from 1988 was worth £25,944.20 using the retail price index to calculate its current value.

As for the deal, it seems to be pretty much as expected from an equity release product where there's no interest being paid. They just keep on increasing the debt by the interest until both partners have died and the house can be sold to repay the loan and accumulated interest.

Why does it seem like a mis-sale?

Dan_Collins_2

Cos they either lived longer than expected or they are upset they have lost £100k.

This is why I refused to get a licence for equity release. I hate it, it can help in some cases but you know what people are like over money and I did not want some long lost son or daughter complaining, you know who will win!

Gorgeous_George

They haven't lost £100K.

Assuming zero interest, they've lost £86K. Nobody can offer loans at 0% so that's irrelenant.

At RPI, £14K is now £28.5K so they've lost £71.5K. Nobody can offer loans at RPI so that's irrelevant.

At BofE base rate, £14K is worth £53,069 so they've lost £46,931. Even the best mortgages are higher than BofE base rate

It works out at BofE base rate + 3.3%. Seems expensive for a secured loan but if that's what they signed up to...

... and there was a risk that the property would not be worth enough to cover the debt.

GG

poppy10_2

Gorgeous_George wrote: »

If anyone should be sued it is your parents' maths teachers.

:rotfl::rotfl::rotfl:

That might be my new signature :T

Dan_Collins_2

Gorgeous_George wrote: »

They haven't lost £100K.

Assuming zero interest, they've lost £86K. Nobody can offer loans at 0% so that's irrelenant.

At RPI, £14K is now £28.5K so they've lost £71.5K. Nobody can offer loans at RPI so that's irrelevant.

At BofE base rate, £14K is worth £53,069 so they've lost £46,931. Even the best mortgages are higher than BofE base rate

It works out at BofE base rate + 3.3%. Seems expensive for a secured loan but if that's what they signed up to...

... and there was a risk that the property would not be worth enough to cover the debt.

GG

What I am is saying is they see it as lost 100%, the people inheriting more so!