With mounting speculation about a potential downturn in the property market and house prices, figures from SHIP have indicated that, as the average homeowner takes out an equity release plan at the age of 70, the guarantee is unlikely to be called upon.
However, SHIP said with its ‘no negative equity guarantee’ included in all of its equity membership plans, the plan provides ‘even greater peace of mind’ for the client.
Analysing the cost of an average lifetime mortgage plan against average projected house prices per region (at zero to 2 per cent – the long-term average inflation) and at -2 per cent deflation, SHIP research into regional variations revealed that areas with low property values would induce negative equity at a quicker rate.
It showed properties in Scotland would take 18 years to enter negative equity (with house price inflation of 2 per cent), contrasting with the results of London that suggested a time span of 35 years for negative equity to be realised in the capital. If house price inflation were to fall by 2 per cent, SHIP indicated that negative equity would be reached within ten years in Scotland and 19 in Greater London.
Jon King, chairman of SHIP, said. “The SHIP ‘no negative equity guarantee’ is a vital cornerstone of equity release products, providing customers with absolute peace of mind that whatever happens to property prices, their home is protected.”
“The guarantee, alongside all of the other SHIP product guidelines, is designed to protect a vulnerable category of consumers making a very important decision about a long-term product and to ensure that their experience of equity release is a happy one,” he added.
