Concern Over Rise in Equity Release

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.

To rent or sell? That is the question.

My longstanding tenants gave me notice this week and will leave in four weeks and so I’m going through the traditional ‘shall I sell up?’, ‘shall I rent?’ dilemma.

I always start by looking at what’s for sale and to rent in the area and how much is being asked I know I know asking prices can be higher then actual recieved price/ rent – but at least you know the competition and the prices potential tenants and buyers will be comparing you with. After all you have to put yourself in their shoes and see what else they could get for their money.

I make a list of the properties in excel, grouped by price (£170k, £175k, £180k, £185k etc…), there were a few at either end and a lot for £175k so I know th

ere’s some choice out there – looking at the more expensive ones they had new bathrooms and kitchens whereas mine does not – neither does it have double glazing but on the plus side it has three double bedrooms and a long gar

den which backs on to a private park. Usually these victorian terraces back on to one another with little privacy outdoors.

Primelocation and Rightmove have always been my hunting ground s for t

his type of data – then a look at sold house prices in the area. This is free information held by the land registry but now made available in a variety of places – Nethouseprices is a good one. This Land Registry data is however 6 months old as it is compiled from the new registration of land titles and can

take time to become availabale. In a stable market this doesn’t matter but in recent years prices have fluctuated greatly over relatively short periods. The recent pick up this year for example won’t show in sold prices yet.

Then on to visit The Best Estate Agent In Reading. A former neighbour of

mine, fantastic salesman (I bought a house from him a few years ago) and trustworthy – the latter characteristic being the one i most value in an Estate Agent (or anyone for that matter).

He asked pertinent questions – how much did you buy it for? How long

can you afford to leave it empty? What condition is it in now? Have you updated, modernised? He’s worked this area for about 6 years and remembers the house, knows the road and I trully believe he could sell it for me.

The probalem is the market – 6-8 weeks fto sell, worst case scenario £170

k he says, best £175k – depends if you can afford to wait but the market is slow and doesn’t look to be heading to 2008 levels this year.

His advice? Rent and sell concurrently – ensure the Buy to Let mortageg is covered and start marketing the property – for the price of a HIP at £249 and nothing else to lose.

Finally, I was very surprised by the figures on Zoopla in terms of the pr

edicted value of the property. I first read about Zoopla in .nett magazine in sydney where they were profiled about 18months ago. Looking at the Board of Directors, the technology and knowing a bit about the market I could see great potential but the property data was simply rubbish. I knew my area nd t

he market and prices were way out. But they’ve obviously built up enough data and got smart enough about cleaning it up and kneading it in the right way to bake up a plausable Value Estimate of £176,979. The rental value was still way out – £626pcm when I know that going rate in the area to be around £750. Not bad though and another tool in the toolbox – I think we’ll continue to see good things from Zoopla.