Home reversion plans UK have unfortunately seen a steady decline in popularity recently. Similar to many businesses who have seen their demise recently due to changing consumer shopping habits, home reversion has seen a similar fate for the same reasons. When the likes of Blockbuster, HMV and Jessops has gone into administration, analysis shows that their business models have unfortunately fallen victim of the times; that is changing consumer demands.
The same can be said with home reversion plans. They were the first types of equity release schemes in the market, however due to inflexibility and lack of innovation & design, they are now snubbed in favour of the lifetime mortgage. This is clearly illustrated by the fact that, while there were eight equity release providers offering home reversion plans in 2007, the number had reduced to only two providers in 2015. Statistical data from 2015 about the types of equity release products used in the UK show that home reversion plans make up less than 1% of all the equity release business written in the UK. These figures show that the drawdown lifetime mortgage now makes up 62% of the market and conventional lump sum equity release schemes account for 36%.
This goes to prove that the demand for home reversion plans is clearly reducing; even newer and improved version of lifetime mortgages from a growing number of providers are becoming available. The growing number and increasing flexibility of some types of lifetime mortgages is, in fact, one of the reasons for the decline in home reversion plans.
Interest only lifetime mortgages offer people an option of having a lifetime mortgage where you only make monthly interest repayments and no capital repayments. By making full and regular interest payments, you can potentially keep the balance on your loan level. This gives you more control on repayment and allows you and your beneficiaries to know exactly how much you will owe at the end of the term.
The main advantage that interest only lifetime mortgages have over home reversion plans is the fact that while offering all the flexibility that they do, they also allow customers to retain full ownership of their property – something that has become increasingly important to people.
Most people become uncomfortable at the thought of losing ownership of their house, even if it is part ownership. Although home reversion plans guarantee customers the right to live in their home, rent free, until they die or move into long term care, the thought of losing ownership can be a troubling one.
Changing attitudes towards savings and inheritance mean that people today are much cannier about their financial options and are interested in optimising their financial assets, while also protecting their legacy. Today, there are equity release options that offer people arguably better ways to do this than home reversion plans do.
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