In a recent report an equity firm in the UK has warned that many pensioners may actually be paying over the odds when they release cash from their homes.
The warning came from Key Retirement Solutions, which is a leading equity release firm. The company said that firms’ failure to provide proper advice to pensioners had been highlighted through an increase in the average amount being withdrawn from properties through equity release.
Key Retirement Solutions has said that firms need to be advising pensioners about drawdown plans, which can cut the interest that is repaid on the loan.
According to figures a typical £55,000 equity release loan with an interest rate of 6.5 percent could cost around £30,000 more than it would with a drawdown plan. Over the past year the average amount that pensioners are withdrawing from their homes through equity release has gone up by 16 percent to over £48,000.
Officials from Key Retirement Solutions have said that they are worried that pensioners are not getting the right advice of being directed down the best route to save them money, and in the current financial climate many pensioners are ending up paying far more than they need to, which is concerning given that average loan levels have increased as pensioners struggle to manage.
One official said: ‘We are concerned that consumers are borrowing higher levels against their homes which have been falling in value, and that consumers are potentially being excluded from the savings which drawdown offers. Consumers benefit from the fact that interest only accrues on the amounts which have been drawn which can result in savings of many thousands of pounds. Taking in excess of what is needed at a given time can be a very costly experience.’
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