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  • FIRST POST
    • capital0ne
    • By capital0ne 10th Sep 18, 7:14 PM
    • 536Posts
    • 261Thanks
    capital0ne
    Next Mis-selling scandal looms
    • #1
    • 10th Sep 18, 7:14 PM
    Next Mis-selling scandal looms 10th Sep 18 at 7:14 PM
    The next mis-selling scandal is live and running, and its called Equity Release.
    Article in the Telegraph last week:

    The 'dangers' of equity release: 'My 65,000 loan is costing me 12,000 a year in interest'

    Shirley Rosenthal and her husband, Stanley, took out an equity release mortgage with Hodge Lifetime, then known as Julian Hodge Bank, in April 2004 on their property in Buckhurst Hill, Essex.

    The couple released 65,000 from their home to pay for new windows, carpets and general home improvements and were charged a fixed interest rate of 7.15pc. This was negotiated by Mr Rosenthal, as he looked after the family finances.

    Following his death earlier this year, the true cost of the plan became apparent to Mrs Rosenthal. The 79-year-old has been charged 12,261 in interest in the past year alone, a figure that will only increase in future years thanks to the rolled up interest charged. Mrs Rosenthal now owes 178,210 to Hodge Lifetime on her 400,000 property.

    When my husband died we started going through all of his papers and my daughter realised that we owe nearly half the value of our flat, Mrs Rosenthal said. We were horrified to see how much all the interest has mounted up.

    https://www.telegraph.co.uk/personal-banking/mortgages/dangers-equity-release-65000-loan-costing-12000-year-interest/?li_source=LI&li_medium=li-recommendation-widget
    (apologies paywall link)
    The point here is that people just do not understand interest, especially compound interest, no matter how it's explained

    Trust me, in 20 yrs time or sooner it will be a huge mis-selling scandal with loads of companies piling in to help (after their cut of the compensation).

    And some of the TV adverts extolling the virtues of equity release make the salesman sound so jolly what could possibly go wrong.

    So kids, if your parents take our equity release, there will be NO inheritance to come to you. Just as long as you know that it's fine.
    Sleep tight - it will all be okay.
Page 3
    • Malthusian
    • By Malthusian 13th Sep 18, 11:26 AM
    • 4,651 Posts
    • 7,435 Thanks
    Malthusian
    The point is more about smaller homes in general. In some places there are families with two children living in two bed houses while old people are rattling around in four bed detacted houses as downsizing with stamp duty is unaffortable.
    Originally posted by thrifty_pete
    Stamp duty is a very unfair tax, but it is not enough in itself to make downsizing unaffordable. If you were only going to realise a few measly tens of thousands of quid then it's not going to make much difference to how much you can spend over the next decade or two, and is unlikely to be worth the hassle of moving in the first place.

    The problem with downsizing is that the most valuable part of a house is usually the land. The few thousand bricks that make up a couple of extra bedrooms are worth almost nothing. Going from 4 to 2 bedrooms but keeping the same size kitchen, garage, living room etc etc doesn't free up enough land and enough money to enable a significant increase in spending.

    If the family wants a 3- or 4-bed so their children can have a bedroom each then they can buy one. There is no need for one of the old people to move out of their 4-bed house, there are plenty of other 4-bed houses on the market. The idea that the old people are preventing them from having a 4-bed house is absurd; if the old people put their 4-bed on the market, the family either wouldn't want it or wouldn't be able to afford it.

    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.
    • thrifty_pete
    • By thrifty_pete 14th Sep 18, 11:57 AM
    • 235 Posts
    • 50 Thanks
    thrifty_pete
    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.
    Originally posted by Malthusian
    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.
    Last edited by thrifty_pete; 14-09-2018 at 12:42 PM.
    • coyrls
    • By coyrls 14th Sep 18, 2:19 PM
    • 1,041 Posts
    • 1,092 Thanks
    coyrls
    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.
    Originally posted by thrifty_pete
    Brexitiers already searching for scapegoats?
    • Malthusian
    • By Malthusian 14th Sep 18, 3:00 PM
    • 4,651 Posts
    • 7,435 Thanks
    Malthusian
    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.
    Originally posted by thrifty_pete
    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?
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