Equity Release Should Be Included In All Mortgages

Equity Release Should Be Included In All Mortgages.

The Financial Conduct Authority has this week suggested that mortgage lenders should look at including flexibility in all mortgage contracts to allow for those in later life with mortgages outstanding to convert them to ‘interest roll up’ schemes. 

In short, pensioners being allowed to convert their mortgage to a Lifetime Mortgage Schemes, essentially an equity release scheme, meaning that when you choose you can stop making mortgage interest payments and the debt can roll up.

This would help those that are trapped in a mortgage and making mortgage payments from pension income, to reduce expenses and have greater spendable income.

Impact

Government will lose revenue by having smaller estates subject to inheritance tax.

Local Authorities will lose revenue by having smaller estates to means test for care fees i.e. the local authority will have to contribute more to fund care in later life.

Government will save money if people have greater disposable income and lower benefits will be claimed.

Mortgage lenders will suffer reduced income with interest payments stopping and rolling up. They will have to wait longer to realise their profit.  This will place enormous capital adequacy strains on lenders that they are required to maintain to prevent further a banking credit crunch crisis.

Comment

Yet again, this will encourage a debt culture rather than a savings culture.