Equity release has come a long way in the past 35 years or so.
In fact, it has very much charted the same course as my career as a journalist over the same period of time: suspect to begin with, much improved, but still could do better.
Equity release was one of the first areas of the personal finance world that floated my boat when I joined a national newspaper in 1990; I had previously worked for the much missed Money Management magazine (part of a suite of superb FT publications) where I tended to specialise in investments.
Although I respected the doyen of equity release at the time, the kindly Cecil Hinton, and even spent a happy day meeting some of his clients, I was soon reporting on the muck that was investment-bond-linked equity release.
A toxic financial product that caused nothing but misery as the investments fell in value and the equity loans mushroomed to the size of nuclear clouds. Guardian Royal Exchange, Fisher Prew-Smith, West Brom Building Society – I spilt journalistic blood with them all.
Today, equity release is a product far more consumer orientated than it has ever been.
Although rising interest rates and wobbly house prices do not provide an ideal backdrop, equity release does give an option for many homeowners to tap into the equity locked up in their castles, bungalows and four-bedroom detached houses.
An option that some retired people may now find irresistible, given the current cost of living crisis and inflation taking crocodile-size bites out of their household finances.
My mum and dad (who is sadly no longer with us) turned to equity release when they ended up cash poor and equity rich in retirement. It has allowed mum, now in her late 80s, to stay in the home she has no desire leaving (she’s both stubborn and mightily proud of her home) and as a family we have accepted her right to do so.
Of course, the plan that my parents bought bears little resemblance to those available today. Though I have looked to see if the loan can be switched, onerous (and unintelligible) early redemption penalties make it a no-go.
It also does not have the bells and whistles that modern day equity release plans have, and which maybe I and other family members would have used to keep the outstanding debt under control.
For example, it does not provide the ability to pay some of the interest every month, rather than have it all roll up into the loan, snowballing debt upon debt.
Nor does it allow irregular repayments of debt or the ring-fencing of a slice of the home value’s for inheritance purposes (some of my siblings would have liked that).
