Wealth managers will take note
In theory, the sooner a client can extract money from their estate, the better they can plan for IHT.
While a person’s pension isn't usually part of their taxable estate, property can be taxed at up to 40 per cent, meaning drawing money out of a property early can avoid some of this tax.
This is why Forsdyke anticipates a growing number of wealth managers, as well as other third parties, taking more notice of the products equity release lenders offered.
“Looking ahead, we anticipate that in 2022 there will be an ever-greater need for advice relating to later life financing,” he said.
“Shifting pension provisions, maturing interest-only mortgages, lower costs and changing attitudes are all combining to drive up demand from the over 55s.
“We are already engaging with a growing number of wealth managers, law firms, private offices and financial planners who are beginning to recognise just how useful a tool equity release and other forms of borrowing can be for their HNW clients.”
While these third parties might be interested, Forsdyke highlighted the “knowledge gaps” they had regarding how best to put these products into action.
“We are playing a key role in educating financial professionals and their clients about how releasing equity locked up in property can be used effectively,” he explained - be that to reduce potential tax burdens, improve cash flow, create liquidity, or pass on wealth to the next generation.
Later life mortgage rates began to climb back in October, raising concerns amidst advisers for borrowers.
But with the economic recovery no longer anticipated to be as quick as previously predicted, many lenders had slowed or delayed plans to put their rates up, with some even dropping them back down at the tail end of November.
For that reason, the high-net worth advice specialist anticipated headline rates in lifetime mortgage borrowing to move above 3.5 per cent over the course of the next 12 months.
ruby.hinchliffe@ft.com
