In line with general population, members of Asian community, especially those who came here in late sixties, after East African colonies gained independence, have settled down well and now enjoying well-earned retirement in their mortgage free homes.
Even their highly educated children, on most part, have settled down well in their own homes!
So many such pensioners, who are brick rich but cash poor, are tempted to go for equity release, so often to help their children or grand-children to climb property ladder, as house prises have shot up so much that it is difficult for our children to buy property without hefty cash deposit that only their parents can provide, either from their own savings or go equity release.
As over 55 qualify, the business is booming. They are expected to borrow some £5 billion annually, but in common with any borrowing, it comes with a warning, study small print and consults financial advisor as well as your children, as on most part, our highly qualified children are financially street-wise and their opinion may make a difference. Unfortunately it is a trend among Asian community not to have financial advisers, unlike in USA.
If this accelerating trend continues, the rich inheritance, leaving family home to children will become increasingly difficult; especially if we live longer and let interest accumulate which will eradicate the remaining house equity.
The trend in life expectancy is on the rise and age of 8o for men and 85 for women is common occurrence.
As social care becomes less and less available from the Council and expensive privately, costing at least £500 a week, even double that amount if we have to move to a nursing home, it is extremely advisable to plan retirement early during working life, have at least two additional pensions besides statutory government pension, one from work and second privately from insurance policy, as equity release is not a substitute for robust pension pot, a sustainable monthly income.
Equity release has its pitfalls and in extreme cases, borrowers may be landed with huge bill and may become homeless if borrowed amount and accumulated interest, with falling house prices become negative equity.
I hope FCA will keep close eye and provide guidance to financial advisers where it merits!
Kumudini Valambia
By email
