The turbulent markets of recent weeks will hit some elderly people particularly hard, with stock market gyrations wiping millions of pounds off their pension funds, and the outlook for house prices and interest rates looking increasingly uncertain. In the past week or so, there were reports that house prices are cooling and have started to fall in some parts of the country, while the decline in inflation published recently provides evidence that, contrary to previous expectations, the MPC may not need to raise interest rates again.
Nigel Hare-Scott, sales director of Home & Capital, said: "What people in or preparing for retirement particularly value is certainty, and we are entering a period of jitters. Pensions or investments predominantly linked to the stock market will have seen their value fall as the FTSE and other world stock markets have nose-dived, and with interest rates now looking less likely to rise again, cash rich people who live off their savings income cannot bank on further rises in their interest income. ”
Elderly people looking to release cash from their homes through equity release schemes may also be hit by the effect of more conservative property valuations and any sustained reduction in house prices.
Whilst Home & Capital would advise against making any hasty decision, Nigel Hare-Scott explains that elderly homeowners looking to raise either a cash lump sum or an income against the equity in their homes might do well to act sooner rather than later.
Hare-Scott said: "In this uncertain environment, surveyors are being more cautious over valuations, which reduces the amount that homeowners can raise under an equity release plan. This will get worse if a fall in house prices becomes widespread. People may find that they can raise more through equity release now than they will be able to in the future – this is particularly relevant for those who need to raise a larger sum relative to the value of their property. If they are considering how to supplement their pension or raise money to improve their lifestyle in retirement, they should consult a financial adviser who will guide them through their various options, including downsizing, a lifetime mortgage or a home reversion plan. It was also reported recently that personal debt, at £1.35 trillion, now exceeds GDP – and in many cases the over 55 age bracket have substantial borrowings. Equity release can enable them to consolidate existing borrowings.”
