"I asked whether she had considered equity release. She said she had heard of it but none of the people she had spoken to had mentioned it."
She recently divorced and is under pressure to buy out her ex-husband’s interest from the house she is living in. There is currently no mortgage on the house.
She has approached several banks, building societies and mortgage brokers. However because of her age no-one will give her a mortgage. She therefore considered cashing in some pensions she has, but the financial advisers she spoke to have convinced her she would be foolish to take this action. She has been told of the tax she will incur and asked what will she live off in retirement.
She believes her only course of action is to downsize which is depressing her. After going through the trauma of a divorce, she does not really want to move from the home she has lived in for many years, where she raised her children and where the majority of her memories are pleasant. It is also convenient for the shops and is within a short walking distance of the GP Practice where she works.
What’s more, the smaller houses she has looked at are not as convenient for her and she cannot see how life would be better if she purchased one of them.
I asked whether she had considered equity release. She said she had heard of it but none of the people she had spoken to had mentioned it. She therefore did not consider it was the solution for her.
I suggested no-one she had spoken to either sold or advised on equity release and therefore would not feel comfortable discussing the product with her. I gave her a broad outline of how the product worked and the guarantees that were available. I suggested however that she was probably too young to use equity release for the purpose she wanted, particularly as she was still working and expects to do so for another 10 years or more. I mentioned that products exist that are interest-only mortgages that can be tipped into equity release when she could no longer afford the interest. For her, this could be after she stops working
On hearing this, Jessie seemed a lot happier that there may be an answer to her problem that did not involve her moving house. She thanked me for giving her something to think about and asked whether I now felt capable of giving a urine sample.
Our brief conversation may have given Jessie something to think about that could solve her problems. However it also gave me plenty to think about too:
- How many people go to advisers but do not receive what would be the best solution for them because the product provider or adviser is not authorised to deal with all products?
- How many people in their late fifties or older, because of a change in circumstances are looking for a mortgage, but are unable to source one?
- In the same age range how many people have interest-only mortgages that may be going into equity release too soon or worse are downsizing when they don’t really wish to?
- How many people downsize without receiving financial advice on what to do with the proceeds?
- How many people, who are about to retire, will need to use their housing wealth to augment their retirement income but are not receiving a holistic financial plan advising them what the possible solutions could be?
There is plenty to ponder there both for my own organisation and the industry as a whole. Since talking with Jessie, I have seen a survey conducted on behalf of NOW: PENSIONS suggesting 40% of homeowners expect housing wealth to form a crucial part of their retirement income. This just goes to illustrate the number of consumers that may not be getting the help they are looking for.
