Homeowners Cash In On Properties

Posted on: 26 March 2008 by Gareth Hargreaves

Home improvements top the shopping list for thousands of older people who release money from their properties when they reach retirement, according to figures released by Norwich Union.

Home improvements top the shopping list for thousands of older people who release money from their properties when they reach retirement, according to figures released by Norwich Union.

Research by the company, which has launched a new equity release product allowing people to get cash out of their homes, also shows that nearly half of customers opt for new cars or holidays.

And with the equity release marketing increasing more than tenfold over five years and continuing to boom, the signs are that more and more people are taking advantage of the opportunity to turn their financial wish lists into reality.

But the money doesn’t just go on luxuries – a quarter of people put some aside for a rainy day, or invest for future needs such as long term care.

Norwich Union equity release plans work by unlocking a proportion of the value of a property from a property by way of a mortgage. The customer retains ownership of their home, and has nothing to repay during their lifetime unless the house is sold or they need to go into long term care.

Norwich Union asked more than 2500 of its equity release customers how they spent the money. The results were:

•Home improvements – 54%
•Investing for future needs – 25%
•Holidays – 23%
•New cars – 22%
•Living expenses – 16%
•Pay off debts – 10%
•Gifts – 7%

Norwich Union’s latest equity release product, the Index Linked Cash Release Plan, has a minimum eligibility age of 55 – the lowest minimum age limit within the market – so people don’t have to wait until retirement to unlock the capital from their homes.

The loan-to-value ratios are higher than for previous products, so more cash can be freed up. This has been made possible by the introduction of a new interest rate structure. The interest rate is linked to the Retail Price Index, and includes the added protection of a maximum rate, currently 10.14 per cent.

Norwich Union has also relaunched its existing fixed rate Flexible Cash Release Plan with an improved benefits package.

Daren Carter, head of equity release marketing for Norwich Union, said: “Equity release is becoming more and more popular as people understand the benefits it can offer.

"They are realising that it is not a 'last resort' way of raising money, but a valid and effective way of making the most of an asset they have worked for most of their lives to buy – their home.

“Equity release is a key part of financial planning for retirement, and we are now offering alternative types of product so people have a choice according to their needs and preferences.”

The Index Linked Cash Release Plan has a minimum interest rate of 4.89 per cent and a maximum interest rate of 10.14 per cent. The actual rate charged will depend on the annual change in the retail prices index.

The Flexible Cash Release Plan has a fixed interest rate of 7.79 per cent.

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