Coronavirus and Equity Release

06 May 2020

We live in very troubling times. The current COVID-19 pandemic is impacting our lives in many ways, not least of which financially.

So, as the impact from the current pandemic continues to unfold, we aim to keep you informed about the twists and turns in the market that may have an impact on you.

This article looks specifically at the equity release market, as well as any relevant changes that may be important to you as you navigate your financial planning.


What is equity release?

In practice, equity release can work in a number of ways, but the principle is the same: you unlock some of the equity that is sitting in your home so that you can use it today, as you see fit.

One of the best things about equity release is that you remain living in your home, so there’s no need to go through the stress of selling or moving.

This option is only available for homeowners aged between 55 and 95 though, and whether it is right for you will depend on your own unique set of circumstances.


Coronavirus impact on equity release

The coronavirus pandemic has meant two changes with regards to the equity release market.

First off, the amount of equity that can be released is based on the valuation of your property. Due to social distancing measures, lenders are now using an automated valuation model to estimate the value of properties without physically visiting them.

This model uses a number of factors, like the location of your property and how much nearby properties have recently sold for, to generate an estimated valuation.

Secondly, the Equity Release Council has modified its requirements for face-to-face legal advice to allow for the provision of legal advice via telephone or video conferencing. This allows the equity release market to continue with as little impact as possible, as many people are turning to equity release now to offset against financial uncertainty.


Using equity release flexibility to combat uncertainty 

One of the most difficult aspects of this coronavirus pandemic is the uncertainty. We are truly in unprecedented times. And, no matter what you read, believe us when we say that everyone is in the same boat. Nobody knows exactly what the future holds when it comes to the economy.

Over the last decade, the range of products within the equity release market has doubled. As such, the flexibility afforded by the different equity release products can make it an attractive option right now.

Some products allow for flexible interest repayments so that interest on the money that is unlocked can be repaid as and when. Other products allow the interest to be rolled up into the package, so there’s no requirement to make repayments at all.

What’s more, some products provide the option to switch from repayment plan to a lifetime plan at a later stage. This flexibility can be reassuring when the future is uncertain.


Overcoming volatility with equity release

Another consideration in the current crisis is the volatility within the stocks and shares market, and any other markets tied to these, including pensions. 

Over time, stocks and shares generally increase in value. They do go through periods of volatility, where some of the growth is lost, but usually return growth over time. As such, during these dips in the economic cycle, it is generally advisable not to withdraw on certain investments to protect against poor returns. 

This is all fair and well provided the investments weren’t earmarked to be used in the foreseeable future. However, that’s not always the case, and many people have investments tucked away for specific occasions that have taken a hit due to the economic damage caused by COVID-19.

As such, and depending on individual circumstances, equity release may provide an alternative to withdrawing investments when they’re down.


Equity release interest rates: how low can you go?

Another point to consider during the current pandemic is that interest rates are at an all-time low. As such, the cost of borrowing is also lower.

Research has shown that equity release interest rates fell during the 18 months leading into the current crisis, and so far, they’ve remained low. 

With the Bank of England base rate now set at an all-time low of 0.1% these may remain low long-term. Due to the uncertainty in the market right now however there’s no guarantee of this. Some lenders may increase rates to insure against the risk of higher defaults. 

What we do know, is that currently, the cost of borrowing is very low by historic terms. As such, if equity release is something you’re considering, now could be a good time to take advantage of this.


Conclusion: equity release and coronavirus

Equity release can provide a number of benefits to safeguard against the uncertainty and volatility that is present in the market right now.

As with all financial products, however, the right solution for you depends on your own set of specific circumstances.

To chat with our team of friendly and professional financial advisors about your own situation please don’t hesitate to get in touch.


Call 0203 745 5893 for a free, no-obligation chat about the range of options available to you. 

To read more about Equity Release please download our FREE PDF guide or read more about finding the right advice on our News Page.


As this is a lifetime mortgage, to understand the features and risks, ask for a personalised illustration.  Our initial consultation is free and then if you wish to proceed, there will be a fee of £495 payable upon application for our Lifetime Mortgage Service. We will also receive commission from the lifetime mortgage lender.


Thanks to Terry, our guest blogger. Terry Downie is a financial services copywriter, content writer and blogger. His business Proper Copy specialises in making complex topics user-friendly and easy to understand.