Equity Release market update
Lifetime Mortgage lenders and solicitors are finally getting to grips with the coronavirus lockdown, but what has this period of change meant for those who are considering Equity Release?
David Forsdyke, our Later Life Finance expert, gives an update on the Equity Release market.
Products are designed for, and available to, older homeowners, but with an average age of 75, our Later Life clients are in that group the government are advising to be ‘particularly stringent in following social distancing measures’. This can make navigating the process of taking out Equity Release even more tricky.
Valuations
A key part of any Equity Release transaction is determining the true value of the property. However, the majority of surveyors are not carrying out physical inspections of properties at the moment. This is a sensible approach to protect Equity Release customers, but has meant lenders making significant changes to how they establish the value and condition of property.
Most Lifetime Mortgage lenders will now accept remote desktop valuations on properties worth up to £1million within the M25, and £750,000 outside of the M25. One lender, Legal & General, will value up to £2million with their own in-house surveyors, but then apply a 95% cap to the value. Properties of higher value, which is common amongst Knight Frank clients, will have to wait until a physical inspection can be carried out. We are encouraging clients with higher value properties to talk to us and submit applications as soon as possible so they are at the front of the queue when the lockdown is lifted.
Lenders have also imposed certain LTV and criteria restrictions, which may mean the more unusual properties will have to wait, even if they are below the new desktop valuation limits. So if you have a thatched roof, have more than 2.5 acres, or own a listed building, you may have to join the queue and wait until physical inspections can begin again.
Solicitors
Current rules by the Equity Release Council require a solicitor to meet with the customer face-to-face, which is obviously not possible under the lockdown guidelines. Last week, after a short consultation with industry experts (including me), the Council issued temporary guidelines for solicitors, giving a modification to the face-to-face requirement. It includes using remote phone and video processes plus some additional steps designed to protect clients, whilst maintaining safe and sensible social distancing. Most solicitors have now made the necessary adjustments and pipeline cases are proceeding.
Advice
Although we always prefer to advise our clients face-to-face, such meetings with an adviser are not possible, or sensible, under lockdown. The Later Life Finance team at Knight Frank Finance have made some quick but effective changes and are successfully delivering advice over the phone, or using video conferencing where clients are comfortable with technology, or engaging with close family where perhaps they are not.
Many people will be thinking about Equity Release over the next few weeks to help them and/or their families through the lockdown period. This needs to be considered with the utmost care, as Equity Release is potentially a long term solution to a short term problem. Our team are ready to explain and explore the options. If you would like more detail please get in touch.