"Perhaps a simplification of the language we use may help advisers and lenders deliver the message loud and clear that, 'No! You cannot lose your home when taking a lifetime mortgage'."
With the ageing of our population a certainty rather than a choice, it was equally certain that products that help the elderly have a more comfortable retirement would flourish. Annual lending in 2016 is set to reach another landmark figure, with £2 billion expected to be released by year's end.
However, despite this success there are still a number of myths that still linger around the lifetime mortgage. What's more, regardless of how much we pat ourselves on the back, celebrate new totals being reached, and generally express our positivity about the lifetime mortgage, these fallacies repeatedly knock us back a few steps – so what are these myths we need to bust?
'What if I lose my home?'
This question has become so frequent that it's become somewhat of a classic. Any customer who researches equity release should understand that, thanks to the 'No Negative Equity Guarantee', you cannot lose your home. Alas, people still believe they can indeed lose their home meaning we, as a collective industry, are still failing to get the message of the 'No Negative Equity Guarantee' across.
Perhaps a simplification of the language we use may help advisers and lenders deliver the message loud and clear that, 'No! You cannot lose your home when taking a lifetime mortgage'. But, at present, our language can still be slightly jargon-heavy, thus confusing our products and helping no one. Simplify the facts and we should see more success.
'I don't want to be trapped in my home forever'
This myth seems to follow on from the first in frequency. Too many customers still believe that if they do go ahead with a lifetime mortgage, they will somehow be trapped in their current property for life. With equity release open to those aged 55 and above, we often deal with customers who may not want to downsize immediately, but may indeed plan on a move later in life. Even if this move occurs 20 years down the line, we must explain that modern lifetime mortgages now have 'portability' built in so customers can take their plan with them to a suitable new property.
'Equity release is too expensive'
This is a favourite of the equity release detractors, and one that is perhaps toughest to tackle. Unfortunately, pointing to the fact that rates are at historic lows seems not to deter the naysayers, as they tend to present what they believe are better options. Those who dismiss the lifetime mortgage as 'too expensive', usually follow up with the following suggestions: 'Why don't you remortgage?'; 'You should downsize'; 'Just tighten your belt'.
These alternatives are sometimes suitable, but often they are not. Securing a traditional mortgage has become more difficult for the elderly since the MMR, so suggesting this to those who are say over 75 is really a moot point. For those that cannot remortgage, but want to stay in their family home, receive a boost to their retirement income and have the retirement they deserve, equity release can be the best solution.
Moving on to downsizing. This is one issue that does not get the attention it deserves as those who suggest that it is the best option tend to ignore some very salient facts. First, that downsizing is no easy task and has become increasingly expensive in recent years (recent estimates have put the average cost at over £10,000 nationwide, and over £30,000 if you live in Greater London). Second, they ignore the fact that the pool of suitable housing for the elderly seems to be shrinking virtually unabated. Third, the emotional effects of uprooting from the family home and moving somewhere alien are skimmed over. And Fourth, the simple fact that many elderly homeowners do not want to downsize!
Finally, when it comes to the issue of belt tightening and penny pinching, most retirees will not want to hear that after a lifetime of hard work and paying into our system, they have to surrender the retirement they envisaged. For those that need financial help in retirement, the lifetime mortgage is the only product that can deliver while simultaneously requiring no immediate repayments. If we can bust these myths, the future of equity release will be brighter still!
