With the British economy now in recession, UK households continue to face increased financial strain and reduced spending amidst soaring interest rates and escalating living expenses. The Office for National Statistics reported a 0.3% decline in GDP for the final quarter, following a 0.1% drop in the preceding quarter, officially marking two consecutive quarters of economic contraction. This comes as new research from Senior Capital emphasises the legacy of the cost-of-living crisis on personal finances, showing that 35% of Brits are currently unable to fund their future retirements.
As the UK grapples with a significant cost of living crisis, Senior Capital’s research found that 32% of Brits find themselves unable to contribute to their pension. This financial strain has forced 21% of individuals to postpone retirement and continue working, fearing they lack sufficient funds in their pension pot. The ramifications extend beyond financial concerns, with 25% reporting that their greatest mental health burden stems from worrying about funding their retirement. Additionally, 37% express profound anxiety about their quality of life diminishing due to inadequate pension savings. These figures underscore the pressing need for comprehensive measures to address the escalating cost of living and its profound impact on retirement planning in the UK.
Due to the increase in house prices over the last 50 years, thousands of people find themselves in a situation of having a significant amount of capital wealth, however, are unable to access this to fund their retirement and pension pot in the present. In the early 70s, the average house price stood at a mere £4,975, but according to the latest figures released by the Office for National Statistics (ONS) in July, the average house price has skyrocketed to £290,000. In light of this, Rudy Khaitan, Managing Partner of Senior Capital, highlights how equity release loans unlock capital for those with high value assets, but struggling to acquire with liquid cash. By engaging in equity release, those who are currently struggling have the opportunity to tap into the significant value tied up in their homes, whilst also remaining in them and accessing much-needed funds to alleviate their financial strains amidst the ongoing cost of living challenges.
Managing Partner of Senior Capital, Rudy Khaitan, comments on releasing equity and the importance of LTV: “There is a growing need for new products that offer greater flexibility and choice, particularly in the relatively underserved later-life lending market. For pensioners or anyone planning for their retirement, LTV is a critical component when assessing your quality of life during your later years, so it’s vital to investigate a multitude of options that can help ease your financial obligations, as remortgaging may not always be the right option.
"The right equity release mortgage product, particularly those that offer the greatest flexibility through limited prepayment penalties, can be the better option vs a more traditional mortgage when you want to unlock the value in your home without taking on additional monthly repayments. It allows homeowners to access the equity built up in their property, providing a tax-free lump sum to supplement regular income, whilst still retaining ownership and the right to live in their home for life or until they move into long-term care. This can be particularly advantageous for those who are retired or have limited income, as it offers financial flexibility and stability without the burden of servicing higher mortgage repayments."
Amidst this new wave of pensioners who find themselves living on the poverty line, equity release loans have experienced a record 23% year-on-year increase as a vital lifeline amidst the cost-of-living crisis. According to the Equity Release Council, over 93,000 Brits took out this type of plan/loan in 2022. To create financial liquidity, stability and a better quality of life, Senior Capital was created to serve a growing number of homeowners looking to access capital from the £800bn currently tied up in property wealth.
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