Britain’s later life lending boom!

The number of over-65 homeowners has increased by 52% over the last 20 years as homeowners are ageing at a faster rate than the UK population.

According to the latest report from the Intermediary Mortgage Lenders Association, the need to serve a growing population of older homeowners is producing a new generation of mortgage products.

The report has showed that homeowners over 55 now hold a staggering 69% of the UK’s housing equity and the increase in later life lending products is starting to reflect this.

Some of these new products, which offer features such as no maximum age limit or repayment on an interest only basis, are leading to a ‘softening’ of the traditional divide between later life and mainstream financial products.

With the ageing population and a number of later life lending options becoming available, it will come as no surprise to you that lifetime mortgage lending has increased by 29% every year since 2014.

If you think you could benefit from Britain’s later life lending boom, or to simply discuss what options are available to you, contact one of our advisers today.

Older homeowners are entering retirement but still struggling with debt

Entering retirement should come with a feeling of relief. No more work, you’re entering a relaxed, stress free period of your life, right? For many of us, that’s not quite the case.

Entering retirement in debt is never ideal. Nobody wants to still be paying off mortgages, loans and credit cards in their retirement days. We all wish to have a relaxed retirement, without the worries of financial debt.

However, for many of us, this won’t be possible. It will take more than three and a half years for the average retiree to be debt free, according to research by Prudential. This is going to cost on average £285 a month.

For many this is a substantial amount, especially as some pensions continue to drastically underperform and retiree’s savings are dwindling. But, there are options for older homeowners struggling with debt.

Many lenders are now offering different avenues for retirees and older homeowners ranging from increased maximum ages on mortgages to equity release.

If you’re entering retirement in debt or simply want to discuss your options for older homeowners, contact one of our advisers today!

Is Your Interest-Only Mortgage Coming to an End?

If you are on an interest-only mortgage that is nearing its end, you may be considering the next step. The good news is, you won’t be alone. Nearly 136,000 interest-only mortgages are due to mature in 2017, with a combined value of almost £16 billion. Fortunately, lenders are innovating their products and making more options available for those with maturing interest-only mortgages.

Making plans
A study of those with interest-only mortgages revealed that some borrowers have no plan in place for how to take care of their mortgage reaching maturity. Borrowing into later life can be a complicated scenario and one that needs careful consideration. As your adviser, we would love to help you plan your next step and look through your options.

To get you started, here are just a few ways that lenders can help those borrowing later in life…

Specialist options
There are many specialist lenders that cater for those that require bespoke borrowing options later in life. Several have been working to innovate their over 55s range of mortgage products. These include residential interest-only mortgages, specifically designed for those aged 55 and over, and other tailored older borrower solutions. Some building societies and smaller lenders want to ensure that age is no longer a problem for those that want to borrow into retirement. One lender recently launched as many as 28 new older borrower products, which includes several interest-only options. Specialist lenders often don’t use computers to decide whether you should have a mortgage, and want to help those that need to consider a more nuanced post-retirement borrowing option.

Later life lending
The percentage of people aged over 66 when their mortgage ends climbed from 22% in 2012 to 39% in 2016, a significant increase in just a few short years. Mainstream lenders are now extending their maximum age limits to follow the trend.

Several high street lenders have recently increased their maximum age to 80 and in some cases 85. In their determination to help older borrowers, some lenders even have no maximum age limit whatsoever. Contact us today to arrange a meeting!

 

5 Points for Drawdown Investors Since the Brexit Vote

Drawdown gives the opportunity for an increasing income that many brexit-684134investors look for in retirement. Stock market volatility after political events not uncommon, but it is something to bear in mind if you opt for drawdown. Investments rise and fall in value; this volatility makes drawdown a higher risk option than an annuity, which provides a secure income for life. Your income could reduce, or even run out, if investments don’t perform as you hoped, you take too much out or you live longer than expected. It needs regular management to make sure you are on track to meet your aims.

1. Think about your goals for the drawdown plan

The flexibility it provides means a wide range of investors with different aims have taken advantage of drawdown. Some investors don’t plan to draw any income, others want to draw a sustainable income throughout their retirement while some are happy to make large withdrawals which deplete the fund quickly.

It’s important to think carefully about what you want from your drawdown plan. This is likely to heavily influence where you invest and how much you withdraw.

2. Review your withdrawal strategy

Withdrawing income makes managing a drawdown plan more complicated than managing a pension before retirement. This is because deciding how much to withdraw and when to make the withdrawal is often not easy. Excessive withdrawals will deplete your fund so getting your strategy right is very important.

Selling investments to fund withdrawals while markets are falling will make it harder for your fund to recover from any losses. If you are worried about whether it is the right time to sell investments you could consider delaying the withdrawal or making a smaller withdrawal.

One approach to mitigate the risks of drawdown is to only withdraw the income your investments produce. This is known as drawing the natural yield. By taking this approach you could help preserve the value of your plan because your portfolio has more chance to grow when the stock markets hopefully recover. You still need to remember the income your investments produce is not guaranteed, it could increase, reduce or even stop for a period.

3. Consider keeping a cash buffer

This could help you continue taking the income you need without having to sell investments when markets are down.

If you don’t have a cash buffer now, it might be worth building one up over a period of time. This could be done by keeping some of the income your investments produce as cash or by selling investments when you feel their value is high. You might also choose to keep a buffer of cash savings outside of your pension (perhaps by saving some of the tax-free cash you received when you entered drawdown).

We suggest any drawdown investor should consider holding at least two years’ worth of planned income as cash. The amount you need to hold will depend on your circumstances, for example whether you have other sources of income to fall back on.

4. Review your investments

Volatility in the markets can create buying opportunities but it can also mean the value of your investments can fall rapidly if the markets turn against you.

The investments within your drawdown plan will fluctuate in value. It’s easy to log in to your drawdown account to view your investments and make a trade.  A portfolio with a diverse range of investments is likely to be better sheltered during market falls and provide more consistent performance.

If you are looking to buy or sell investments you might want to consider doing this in stages to spread the risk.

5. Get help when you need it

 

What you do with your pension is an important decision. Therefore, we strongly recommend you understand your options and check your chosen option is suitable for your circumstances. You should take appropriate advice or guidance if you are at all unsure.

This article is not personal advice. We offer a range of information to help you plan your own finances and personal advice if requested. Our financial advisers can provide one-off advice as well as ongoing management of your drawdown plan.

The Dangers of Relying on your Home as a Retirement Nest Egg

Nest-EggNew research from Royal London shows that those of working age who are planning to downsize to fund their retirement could see their annual income drop by half.

1,500 people were surveyed, looking to downsize from an average property value of £310,000 (detached) to £197,000 (semi-detached). By using the proceeds of the sale to purchase an annuity, this would make an annual income of £13,700 including state pension. Given that the average annual wage for a full time UK worker is £27,400, there would be a sizable slump in standard of living.

According to Baring Asset Management, up to 3 million people are planning to use this approach to fund their retirement. There are also barriers to downsizing which homeowners should consider, such as a low supply of housing to move into, and also older children who are not ready to move out yet.