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‘Even borrowing £40,000 could be £320,000 some 35 years later’ – Star Letter 09/11/2018

by: Mortgage Solutions
  • 09/11/2018
  • 0
‘Even borrowing £40,000 could be £320,000 some 35 years later’ – Star Letter 09/11/2018
Each week, Mortgage Solutions and sister-title Specialist Lending Solutions choose the most honest, thought-provoking or opinionated letter or comment of the week posted under our stories or to the editorial team.

 

 

This week, it’s Andy Wilson commentating under the story FCA raises alarm over ‘younger’ equity release borrowers

 

As an active equity release adviser I do sometimes wonder if the minimum age on all plans that have the potential to roll-up the interest should be no earlier than 60.

A 55 year old taking out a plan could easily see rates at around six per cent given they cannot borrow a significant proportion of the property value and may tend to borrow the maximum allowable for their age.

This rate will double a debt in only 11½ years – so if they live to age 90, an initial debt will have doubled three times – thus even borrowing £40,000 could be £320,000 some 35 years later.

I do not see a lot of clients between the ages of 55 and 60 who desperately need equity release in such a way they cannot service at least part of the interest on the loan.

Those that do receive a very thorough warning [on] how the debt could increase and impact on later life.

Andy Wilson

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