The property sector is being challenged to a level not seen since the 2008 crash which according to Equity Release expert, Sandy Ameer-Beg, is likely to see older homeowners taking potentially drastic decisions to raise capital and protect their financial position.
The Founder of Solihull-based Acclaimed Mortgage Consultancy is therefore urging older homeowners to consult the expertise of a specialist before committing to any decisions regarding equity release during the Covid-19 pandemic.
With a reported 37% of people across Britain having their incomes halved due to the unprecedented impact of Covid-19 – brokers are predicting a sharp increase in equity release enquires in the near future as homeowners look at ways to resolve their loss of income.
Despite an initial drop in applications, the Solihull-based mortgage consultants have themselves witnessed a steady increase in equity release enquires in recent weeks as people slowly become more accustomed to life under lockdown and look to shore up their finances.
After £3.92 billion of wealth was released by homeowners last year, with customers using mortgages as a solution to satisfy current lending needs, the prolonged lockdown to the mortgage market has however resulted in a change in the criteria required by lender such as desk top valuations whilst physical valuations cannot take place – however the number of products available in comparison to last year has remained consistent.
Equity release schemes are adopted for a variety of reasons. They allow homeowners over the age of 55 to access their property’s value in return for cash during retirement but as it is a lifetime commitment, applying for equity release cannot be understated.
Citing reasons such as people seeing their pensions and investments hit due to the economic fallout from the stock market, or family members look to assist one another through financial difficulty, Sandy shares the view with her fellow experts that growth will return to the equity release market over the coming weeks and months ahead.
However, in response to the growing number of advertisements promoting equity release as a quick-fix, Sandy Ameer-Beg has suggested that whilst applying for equity release may provide consumers with a solution in the short-term, a lifetime mortgage can come at a cost later down the line and should only be done after all other options have been explored by a suitably qualified Equity Release expert.
Sandy commented: “As Covid-19 continues to impact the UK economy, it is likely that this will spark a growing trend in equity release applications, as consumers look to raise much needed cash in the coming weeks and months ahead.
“The current crisis is already invoking reactive decisions without sound consideration of the long-term implications of committing to certain products, so it is imperative that brokers consider all the options available for their clients before going down a definitive route.
“Having seen an increase in advertisements encouraging homeowners to ‘raise quick cash’ through utilising their property, this will only serve to provoke poor and ill-informed decision making as a huge number of consumers will inevitably still be in panic-mode due to the loss of a steady stream of income.
“Such a decision should not be taken lightly and must be carried out with the appropriate financial advice prior to the submission of the equity release application. It is also important to stress that due to the mortgage market experiencing its own lockdown, there are significantly less options presently available therefore seeking the advice of an experienced professional is advised.
“However, whilst there is no magic remedy to solve the current state of the market, that does not necessarily suggest that there aren’t any suitable opportunities available. The key moving forward is taking a measured approach to reviewing your finances with a trusted and recommended advisor who will consider all options going forward and build a solid plan for the future – rather than promote a short-term solution that may not be in line with the best interests for the client’s future plans.
“Brokers have a duty to establish if the client is raising funds for the right reasons and to act as a soundboard during what is a hugely worrying period, to ensure that they avoid settling for a poorer solution.
“Helping clients navigate through the current crisis by providing an honest view of the market has never been more paramount. Whether a client is seeking mortgage advice or looking to apply for equity release a fully qualified and experienced adviser, preferably one who is a member of the Equity Release Council can tailor the bespoke needs of the client in order to achieve the best outcome.
“What people often forget is that whilst the Covid-19 pandemic is unprecedented as a stand-alone crisis, it is not the first time we have experienced a property market freeze. The same happened in the wake 2008 crash and as such, we are well-placed to continue offering sound advice to consumers in the event of a crisis.”