Starting to advise on equityrelease _____________

What is equity release/a lifetime mortgage? A lifetime mortgage is a way for your client to release money from their home without them having to move. It’s a loan that’s secured against their home to give them a tax-free cash sum. They can take it all at once or in smaller amounts as and when needed.

With a lifetime mortgage your client won’t have to make any monthly payments. Instead, interest is added to the amount owed each month. This means interest is charged on the loan plus any interest already added. The amount owed will go up quickly over time, reducing the equity left in their home. It could also affect any entitlement to State Benefits.

The lifetime mortgage is usually repaid from the sale of their home when the last surviving borrower dies or goes into long-term care. If your client decides to repay the lifetime mortgage before this, they may need to pay an early repayment charge.

How could a lifetime mortgage help your client?

Repaying outstanding interest only mortgages The FCA estimates there are 2.6 million1 interest only mortgages in the UK, excluding buy to lets. Of these, some might not have a repayment plan in place. A lifetime mortgage could be a solution for these clients.

Home and garden improvements Our needs change as we get older. Sometimes your client will just want a change. They may now need to make their home that little bit easier to live in, or add a conservatory or new kitchen perhaps.

Helping family – children and grandchildren With a lifetime mortgage, your client could help their children onto the property ladder. They could even help pay for their grandchildren’s education. If they do, the recipients may have to pay inheritance tax on this money in the future.

Enjoying retirement more For some clients, improving the quality of their retirement with a lifetime mortgage may mean the peace of mind to plan more leisure time to relax or explore new places.

Holidays Getting older doesn’t mean you have to slow down. In fact, some retirees see this time as an opportunity to get the whole family enjoying themselves together.

Helping to pay day-to-day bills Day-to-day, a lifetime mortgage could help clients on a lower annual income enjoy a more stress-free retirement.

Clearing outstanding debts In May 2017, average consumer credit debt was £7,370 per household.2 Some people might be retiring with credit card debt, loans and other debts. A lifetime mortgage could remove the need to make monthly payments. There may be cheaper ways to pay off any debts your client has.

In home care As clients get older, they may need a little more assistance. From general help around the home to regular visits from people to help look after them, a lifetime mortgage may make this possible.

Divorce or dissolution A lifetime mortgage may help a client when divorcing or in the dissolution of a civil partnership.

1FCA/Experian, December 2013. 2 The Money Charity, Money Statistics August 2017.

Is the time right for equity release? The market for lifetime mortgages continues to grow with over 27,000 sales in 2016, releasing £2.15 billion. Lifetime mortgages are increasingly becoming part of retirement planning. They can be a solution for clients who need extra income or funds to help them enjoy their retirement.

Lifetime mortgages are being used more frequently in retirement planning to meet a broad range of client needs, including interest only mortgages without repayment plans and insufficient pension incomes.

This market is an opportunity for advisers and providers to help more clients with a retirement income solution. The growth that we’ve seen reflects ongoing population changes in the UK.

3 Age UK, Later Life in the United Kingdom, July 2017. 4 FCA/Experian, December 2013. 5 Department for Work and Pensions, 2017. 6 Top of the Ladder Housing report by DEMOS www.demos.co.uk/

A growing opportunity to help more of your clients

There are now 15.3 million people aged 60 or older in the UK.3

There are 2.6 million interest only mortgages in the UK, and some might not have a repayment plan in place.4

Our average customer is 71 and borrows £74,413 when starting their lifetime mortgage.

The average annual pension income of a single pensioner is only £10,660. For couples it’s £22,672.5

83% of people aged over 60 and living in England own their home, having nearly £1.2 trillion of equity in their houses. 6

Most people will receive a State Pension, but they may find that it’s unrealistic to rely solely on this.

The journey so far

Lifetime mortgages have come a long way since the first plans were launched. New and flexible product features, such as inheritance protection and optional partial repayments, have been introduced. They continue to improve with regulation support and practical use.

2012 SHIP was re-launched as the Equity Release Council (ERC) with bigger ambitions:

• Membership was extended to include advisers, solicitors and surveyors alongsideproviders.

• It improved client protection. The ERC Statement of Principles was introduced, requiringmembers to offer products and services which conform to the best practices of thesector.

2015 Pension reforms in force from April introduced greater flexibility for clients and the provision of their retirement income.

1991 The Safe Home Income Plans (SHIP) was created in 1991 to protect consumers. It set down various product safeguards, such as the ‘no negative equity guarantee’. The guarantee meant that clients will never owe more than their home is worth.

2000s The changing market together with FSA (now FCA) Regulation allowed more SHIP products to become available. These gave customers a safe and easy way to release equity from their homes.

How to get authorised to sell equity release

For more information, please contact Victoria Wilson, Equity Release Manager:

Email victoria.wilson@therightmortgage.co.uk

Visit rightmortgageadviser.com/mortgages/equity-release-hub

Call 01564 732 744