THINK TANK URGES COUNCILS TO FORM COMPANIES FOR EQUITY RELEASE
The Joseph Rowntree Foundation in a new report ‘Obstacles to equity release’ calls on councils to get together to create a company that could offer equity release loans for older people. It also wants councils to support a better service of advice and guidance.
The report shows that many older home owners could improve their quality of life with extra care at home and better maintenance of their property, if they were to draw on the value of their home to pay for it. But research revealed that this kind of self-help faces significant obstacles. The process is too daunting for many and those on means-tested benefits could end up little or no better off if they release equity tied up in their home.
To make equity release effective the rules on benefits need to change to a simpler system which could help older people to raise the money they need to stay longer in their own home. The report argues that older people should be able to draw up to 3,000 pounds a year from the value of their home for homecare or home repairs, without it affecting their benefits. This figure would match the concession for better-off people to make gifts without affecting their liability to inheritance tax. The rules of the Financial Services Authority require that people are advised against equity release if it would lead to a big loss of benefits. This is a major deterrent for older home owners on benefit who are likely to “do without” rather than release housing equity and lose benefit. Such a change would add little to the cost of benefits.