Home Equity Release May Cost Pension Firms Billions

UK pension companies may be harbouring billions of pounds of losses from home equity release loans. Under equity release, homeowners borrow money against their house's value and don't repay anything until it's sold. That's fine for the borrower, but there are fears lenders have underestimated how much these loans could cost them. At least one firm assumes house prices will rise 4.25% a year. If they don't, firms face losses - or even bailouts. Pensioners whose firms invest in the loans would be protected through the Financial Services Compensation Scheme (FSCS) which is funded through a levy on the industry meaning losses would be ultimately borne by all pension holders. Read more on the BBC website.

https://www.bbc.com/news/business-44992836

Second Borough Launches Right To Part Buy

Conservative-controlled Wandsworth Council is set to give its secure tenants the opportunity to buy a share in the equity of their home. If approved by the council’s executive committee on 28 November, tenants will be able to buy a minimum of 25% of their home from next year and pay rent on the remaining equity. The discount is calculated as a percentage of the full £103,900 Right to Buy discount, meaning the minimum discount would be £25,975. Tenants will be able to buy more equity, 10% at a time, up to the full cost of the property. The scheme mirrors the ‘Right to Part-Buy’ implemented by Labour-controlled Barking & Dagenham in June this year, under which tenants can buy between 25% and 70% of their property. Read more on Wandsworth Council website.

Over-55s Also Being Hit By The Housing Crisis

The spiralling cost of homeownership in the UK has continued to see many priced out of the market, with those fortunate enough drawing on the bank of mum and dad as the only option in getting that first foot on the ladder. However, research by estate agent, eMoov.co.uk, has found that it isn’t just those at the start of the property ladder struggling to get by in the current economic climate, but also those in the later stages of life are having to draw equity from their property in order to survive. There has been a dramatic increase in people over the age of 55 drawing on the equity of their property in order to get by. £17bn of funding has been provided to 350,000 homeowners since 1991, a third of which has been released in the last five years alone. Read more on the emoov website.

Osborne Abandons Cuts To Universal Credit After IDS Quit Threat

Mr Osborne will now seek deeper cuts in housing benefits as he aims to meet his pre-election pledge of cutting the welfare budget by £12bn. Mr Duncan Smith allegedly threatened to resign as Work and Pensions Secretary if the savings were found through cuts to his Universal Credit system. Claimants currently lose 65p in every extra pound they earn as benefits are withdrawn. Following £2bn cuts to Universal Credit, claimants would have lost 75p in every extra pound. Mr Duncan Smith is reportedly working on a shared ownership scheme in a bid to drive down the housing benefit bill, where tenants living in local authority housing for three years would be granted 70% of the equity in the home and rent the remaining 30%. Read more on the Politics Home website.

Duncan Smith's Great Council House Giveaway

Millions of council tenants could become the owner of most of their home for free, under a plan being pushed by work and pensions secretary Iain Duncan Smith. Tenants living in local authority housing for three years would be handed 70 per cent of its equity then rent the rest of the home, in a scheme to slash the housing benefit bill. Mr Duncan Smith wants to reduce welfare spending, and this Right to Shared Ownership idea is being considered. The stake would be equivalent to discounts under the Right to Buy scheme – up to 70 per cent of the value, or a maximum of £103,900 in London and £77,900 outside the capital. He believes it could unleash a new generation of part-home owners as well as slash the £25billion a year housing benefit bill. Read more on the Daily Mail website.

Betts Questions Effectiveness of Housing Programme Funding

Following receipt of a letter from Eric Pickles Clive Betts MP said:

"At a time when the country urgently needs to deliver more housing, I am very concerned that public money for key house building programmes is sitting idle in the Government’s coffers.  The fact that money dedicated for housing is swishing around the Department’s bank account will be of little comfort to those people desperate to have their own roof over their heads. The Build to Rent Fund was supposed to provide equity finance to get much-needed private rented housing off the ground. However, the Government has now announced that some 80% of the fund will be ‘reprofiled’, meaning spending will be deferred to future years rather than starting to help people now. Read more on the Parliament website.

Buyers Are Better Off Than Renters within Five Years

Homeowners prove to be better off than renters within five years, new research reveals. The figures suggest that while renters pay less each month, owners recoup their initial costs and become better off than renters within five years on average as the value of their equity outstrips the value of savings.  Those with mortgages pay £316 more on average per month compared to those renting equivalent properties. But after seven years, the average owner is £13,850 better off compared to an equivalent tenant.  Read more on the Zoopla website.

Shapps to Look At Giving Tenants Free Equity Stakes in Social Housing

Housing minister Grant Shapps has agreed to look at plans to give working tenants a free equity share in their property - which could be cashed in when those tenants leave the social rented sector. The call came from Conservative MP for Harlow Robert Halfon in a debate on social housing in Wesminster Hall. He cited the “Breakthrough Britain” report, by the Centre for Social Justice, which called for social tenants who work, or who make a genuine effort to find work, to be rewarded with increasingly larger equity stakes in their home. Read more on 24dash.