The Inside Edge
Everyone has heard about the bank of Mum and Dad but there are fears that first time home buyers are skipping a generation and looking to their Grandparents for help with funding their purchase.
These concerns have arisen after reports that the sale of Equity Release products has soared in the six months from January to June of this year. The increase equates to a rise of over 10% from the same period in 2011.
During the first half of 2012, the Equity Release Council report that some £424 million was freed up with 31% of those surveyed stating that the money was to be distributed among their loved ones. With young first time buyers struggling to raise a deposit in order to get onto the property ladder, much of this money is being utilised in this way.
Dr Ros Altman, Saga’s Director General put the issue in blunt terms when she stated that the elderly are living longer and their grandchildren are having to wait longer for their inheritance as a result.
‘The last thing you want as a grandparent is for your children and grandchildren to be thinking, “When is granny going to pop off so I can get my hands on the house?” She said.
Among the concerns expressed by some observers is the theory that many who enter into the schemes are not fully aware of the process and how it works. While the debt involved is only repaid upon death, the outstanding amount can double every eleven years.
With that in mind, the Consumer Credit Counselling Service has advised the elderly to consider their own futures and the potential issues involved before entering into any Equity Release scheme.
‘While equity release to help children or grandchildren get on the property ladder or pay for their education can be gratifying for many, it can be a huge burden for others,’ a spokesman said.
‘There are a lot of costs associated with getting older, and it is crucial that these are factored in to any decisions about equity release.’
Andrea Rozario, director general of the Equity Release Council concludes by asking anyone currently considering an Equity Release product to take independent advice before making the final decision.
‘Advisors are incredibly important when it comes to equity release as not only will they help the consumer to decide if equity release is right for them, but also make sure that they are getting the benefits they are entitled to,’ she said.