Simon Chalk, later life planner at LaterLiving also said that homeowners could benefit from being on a reversion plans, which do not accrue interest or register falling house prices on the part that is sold.
Earlier this week, equity release adviser Key Retirement Solutions published its 2010 market monitor which showed that home reversion plans made up 3% of sales last year, lifetime mortgages made up 23% and drawdown accounted for 74% of the market.
Chalk said that despite lifetime mortgages and the drawdown making up the bulk of the market; it is still the most expensive option for the homeowner.
He said: “With a drawdown Lifetime Mortgage, each cash withdrawal is set at the interest rate prevailing at the time. Whilst the current range of rates hovering around the 7% level may seem fairly attractive, it would only take a 1 or 2% hike to make a Lifetime Mortgage an expensive choice in the long run.”
He added that with a reversion plan, homeowners benefited from leaving an inheritance for loved ones, which most lifetime mortgages cannot ensure.
“With the exception of More2Life’s product, no lifetime mortgage guarantees leaving behind a legacy for heirs.”
Chalk added that advisers need to look ahead and talk about the risks of house prices, interest rates, legacies and ageing when discussing equity plans with their clients.
