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For many people aged 55 and over, the road to retirement looks a little different to how it did a decade ago. The state pension age is gradually increasing, meaning more people are seeking other sources of income should they wish to retire before the age of 65 – an age that will increase to 67 by 2028.
Savings, investments, inheritance and property are all assets that could give people more freedom and choice as they reach later life. In fact, post-pandemic property price growth has seen the over 55’s housing wealth reach a staggering £4.4 trillion – making property the 2nd largest asset for this demographic.
As such, products such as lifetime mortgages are growing in popularity. Homeowners aged 55 and over took out a record 12,452 new equity release plans between July and September 2022, 8% higher than the previous quarter. Within the same period, the Equity Release Council reported that total lending in Q3 2022 exceeded £1.7 billion, another record figure.
Craig Brown, CEO of Legal & General Home Finance, comments;
“Equity release is a lifetime product which, along with Retirement Interest Only Mortgages, allows people to confidently plan for the long-term. For customers coming off interest only mortgages in particular, recent product innovations, such as Legal & General’s Optional Payment Lifetime Mortgage, which allows them to pay some, or all, of the interest each month, can be helpful given upwards pressure on interest rates.”
Products like the Optional Payment Lifetime Mortgage (OPLM) enable the client to service the interest monthly, paying as little as £25 to 100% of the interest. Overtime should their circumstances change, the client has the option to stop paying altogether.
Experienced mortgage broker, Louise Baker, has helped many of her clients achieve their retirement goals with the use of an OPLM. Sharing her thoughts on why she believes this type of product is changing the later life industry, Louise comments;
“One of the best features of the OPLM is that the interest rates are fixed for life. For a lot of people, their mortgage repayments can be their biggest outgoing. Being able to reassure them it’s fixed is brilliant, particularly in times of uncertainty. It also gives them the freedom to choose the amount of interest they wish to pay from the outset.”
A lifetime mortgage is a loan secured against your client’s home. The Optional Payment Lifetime Mortgage allows your client to service the interest monthly by Direct Debit, which will reduce the overall cost of the loan. The interest rate is fixed for life meaning we’ll never increase their monthly payment.
There’s no risk of payment default and six missed payments are allowed in the product term. The loan is usually repaid from the sale of the property or when your client dies or moves into long-term care.
Estate planning with the family home has traditionally been difficult. We discuss how lifetime mortgages could provide an alternative way to use property in Inheritance Tax (IHT) planning.
While many people’s retirement income will be provided by their pension, we consider why using property wealth could be a tax efficient alternative for your clients.
Lifetime mortgages are a growing market. Find out how families can benefit from equity release.
This website is designed to give professional financial advisers information and tools that they can use to help control and develop their business and should not be relied upon by private investors or any other persons.