is Buy-To-Let Ethical?

​The Changing Landscape of Royal Tunbridge Wells’ Housing Market:

Exploring the Ethical Dimensions of Buy-to-Let Investment.

 The town of Tunbridge Wells has witnessed a profound transformation in its housing landscape over the last few years, and the surge in private renting has led to significant debates about the morality of the buy-to-let market. 

Let us look at the current statistics compared to 40 years ago to show the seismic shift. Looking at our local authority area of Tunbridge Wells Council. 

9,268 Tunbridge Wells Households are in the Private Rented sector now, representing 19.22% of all homes in our local authority area. 

Interesting when we compare this to the 1981 numbers for Tunbridge Wells. 

In 1981, 5,762 Tunbridge Wells Households were in the Private Rented Sector, representing 16.59% of all homes in the local authority area.

This has started prompting discussions about the role of the Baby Boomer Generation in exacerbating the housing crisis and the ethical implications of the buy-to-let phenomenon. 

This article delves into the factors contributing to Tunbridge Wells' housing challenges, examines the generational economic imbalance, explores the history of housing policy, dissects the impact of financial deregulation, and evaluates the moral questions surrounding the buy-to-let market. 

Generational Imbalance and Economic Disparities

The housing crisis in Tunbridge Wells has ignited a debate over whether the Baby Boomer Generation, aged between 59to 76, bears responsibility for the present situation. Born after World War II, this generation experienced unparalleled economic growth and prosperity during the 1970s and 1980s, benefiting from improved education, government subsidies, rising property prices, and technological advancements. However, critics argue that the success of Baby Boomers has contributed to a generational economic imbalance, leaving their children struggling with soaring rents and burdensome mortgages.

A Glimpse into the Past of the Tunbridge Wells Property Market

To comprehend Tunbridge Wells' current housing challenges, one must trace the key events that shaped its housing market. The mass construction of council housing during the 1950s and 60s, followed by the selloff of many council houses in the 1980s under Margaret Thatcher's Government, is blamed by many for their role in altering the market dynamics.  

To give you an idea of the number involved …

7,029 Tunbridge Wells Households are now in the Social Housing sector (Council Houses & Housing Association), representing 14.58% of all homes in our local authority area.

Interesting when we compare this to the 1981 numbers for Tunbridge Wells. 

In 1981, 8,163 Tunbridge Wells Households were in the Social Housing sector, representing 23.51% of all homes in ourlocal authority area.

As you can see, the numbers are not seismically different, are they? So, what are the other issues that caused this? 

The early 1990s witnessed skyrocketing interest rates (15% at one point), leading to widespread repossessions in Tunbridge Wells (and the UK as a whole). This was one of the catalysts that contributed to the underlying housing crisis of today.

Financial Deregulation and Buy-to-Let Investments

Another catalyst was risky lending practices in the UK and USA. In the early 2000s, UK Banks started introducing 100% mortgages and even riskier lending practices, with Northern Rock lending 125% mortgages (and we know what happened to them). 

All this lending was built on the back of ‘derivative swaps’ between all the world's banks (they would sell the debts (i.e. mortgages) between each other to make money). 

The problem was that many of these derivatives contained lots of safe, low-risk low-profit mortgages and some high-risk profitable ‘sub-prime’ USA mortgages. This had been caused by a change in the law in the USA in the mid-1990s with the easing of lending rules in the US through the Community Reinvestment Act in 1995, which allowed for sub-prime lending.

So, when the money markets started getting cold feet in 2007 because the banks didn’t know if their derivatives had a small or large number of high-risk sub-prime mortgages, the banks stopped lending to each other (because they were worried they wouldn’t be paid back as many of these sub-prime mortgages were defaulting in 2006/7 and being repossessed).

This had a ripple effect on the UK's housing market. The UK banks had much smaller funds to lend out (because they could borrow money from the money markets for the reasons above), so they stopped lending to high-risk UK borrowers (i.e. 95% first-time buyers), whilst at the same time they increased lending to lower-risk landlords with buy-to-let mortgages with a 25% deposit and a stable income.

Millennials and the Buy-to-Let Controversy 

The millennial generation, born between the mid-1980s and late 1990s, has been particularly affected by the surge in buy-to-let investments. These young adults, shaped by the digital revolution, need help entering the property market due to competition with buy-to-let landlords. Critics often portray Tunbridge Wells landlords as greedy individuals capitalising on the housing crisis, exacerbating the sense of social despair among millennials. However, as I wrote in the Tunbridge Wells property blog a few weeks ago, 64% of Tunbridge Wells landlords are not increasing their rents. (If you want to read that article – click here 

Role of Property Developers and Housing Shortage

In response to the growing housing demand, property investors have stepped up, acquiring dilapidated properties and repurposing them into habitable homes. This has provided a partial solution to the shortage of available housing, particularly for those who rely on rental properties provided by landlords and property developers. 

Ethical Dimensions of Buy-to-Let Investments

The ethical considerations surrounding the Tunbridge Wellsbuy-to-let market are complex and multifaceted. On the one hand, Tunbridge Wells buy-to-let landlords have filled a void in the Tunbridge Wells housing market, providing much-needed shelter to many Tunbridge Wells tenants. On the other hand, concerns arise regarding exploitative practices by a handful of rogue landlords and the potential commodification of a basic human need – shelter.

The bottom line is, as the population of Tunbridge Wells grows, there needs to be more properties being built for everyone to have a decent roof over their head. The rogue landlords of Tunbridge Wells need to be put out of business. Finally, tenants should expect a more regulated rental market (which they have achieved over the last few years), with greater security for tenants, where they can rely on good decent Tunbridge Wells landlords providing high standards for their safe and modernised home. 

Addressing the Crisis and Moving Forward

To alleviate Tunbridge Wells' housing crisis, a multifaceted approach is necessary. Fairer regulations for landlords, enhanced tenant protections, and incentivising property development could contribute to a more balanced housing market. Exploring innovative models from European countries, where renting is more prevalent, could provide insights into creating a system that ensures decent and affordable housing.

Final Thoughts

Tunbridge Wells' housing market has undergone substantial changes over the years, with the rise of private renting and the proliferation of buy-to-let investments playing a pivotal role. The generational economic imbalance and ethical concerns associated with the buy-to-let market have sparked passionate debates about the responsibility of different generations and the moral implications of housing as an investment. 

As Tunbridge Wells continues to grapple with housing challenges, collaborative efforts between policymakers in local and central Government, developers, Tunbridge Wells landlords, and tenants are essential to creating a housing landscape that is fair, ethical, and accessible to all.

So, my final question is to you, the reader of this article. 

Only you can decide if buy-to-let is immoral, but let me ask this question first.

If these Tunbridge Wells buy-to-let landlords had not taken up the slack and provided 3,506 extra homes in the last 40 years for people in the area, where would these tenants be living now?

During the height of council house building in the 1950s, UK local authorities were building, on average, around 147,000 council houses a year. In the last decade, UK local authorities have only averaged building around 1,400 council homes a year.

It would cost Tunbridge Wells Council £445.3m to build all those 3,506 buy-to-let homes today that local landlords have funded themselves 

(a figure that assumes the council build on land they own).

That building sum would take up 100% of our local authority's budget for the next eight to ten years.

All this conjures up many questions such as: 

•  Is the buy-to-let practice immoral or in fact necessary? 
• Should, as recently voiced, landlords be restricted to one rental property each?  
• What would our housing landscape be like without rented accommodation? 
• Of the 9,268 Tunbridge Wells households that are in private rented accommodation, how many of those have little or no option other than to rent, so where would they be if there was no private rented sector? 

These are my thoughts; tell me yours!

 

Royal Tunbridge Wells Rental Homes Nightmare

• Tunbridge Wells needs 228 additional private rented properties per year to keep up with current and future demand from Tunbridge Wells tenants. 
• Yet over the last 5 years, Tunbridge Wells has lost 364 private rented homes.
• What are the 5 reasons the supply of private rental properties in Tunbridge Wells are falling? What does this mean for tenants and landlords in Tunbridge Wells?

There has been a rise in demand for rental properties and an 8.9% fall in the number of Tunbridge Wells private rented properties, which has caused Tunbridge Wells rents to rise by 5.6% in the last year, a new all-time high. 

The National Residential Landlords Association asked the respected economics think tank Capital Economics, to carry out research on the UK rental market. It found that if the current trends in the property market in terms of growth of the population, Brits living longer, the lack of new homes building, the reduction in social housing (aka council housing), then demand for homes in the private rented sector needs to increase by 227,000 homes per year.

So, based on those numbers, Tunbridge Wells needs to have an additional 228 private rented properties per year. 

The problem is the number of private rented properties in Tunbridge Wells has reduced from 6,815 in 2017 to 6,451 in 2021, a net loss of 364.

So, why has supply of private rented homes in Tunbridge Wells reduced?

1. Section 24 Income Tax

Section 24 was introduced in 2017 to level the playing field on the taxation of property between homeowners and landlords. Section 24 stops landlords from offsetting their buy-to-let mortgage costs against the profits from their rental property. Interestingly, no other kind of UK business is affected by the Section 24 taxation. In other words, whatever other form of business you might be in, be it butcher, baker or candlestick maker, every other business can offset their finance costs against their profits, except buy-to-let.

The issue caused by Section 24 Tax is that some landlords ended up paying more income tax than they really made in profit after paying their buy-to-let mortgages. Meaning on the back of rising Tunbridge Wells house prices in the last five years, some Tunbridge Wells landlords have sold their buy-to-let investments.

2. 3% More Stamp Duty for Landlords

When someone buys a property, they normally must pay a tax to the Government for the privilege. This tax is called Stamp Duty. Yet landlords must pay an additional 3% stamp duty supplement on top of that when they purchase a Tunbridge Wells buy-to-let property. Evidence suggests some Tunbridge Wells landlords have decided to hold off or scale back buying additional buy-to-let properties for their portfolio because of the thousands of extra pounds that landlords have to pay to buy the rental property. 

3. Holiday and AirBnb Lets

Some Tunbridge Wells landlords are converting their long-term rental properties into short-term furnished holiday and AirBnB properties. Whilst the hassle, stress and service levels are much higher, these types of properties do tend to make more money and aren’t as heavily taxed as normal lets. When properties convert to short-term lets, it removes another Tunbridge Wells property out of the general supply chain of long-term rental properties.

4. Greater Legislation for Rental Properties

With more than 150 pieces of legalisation, and new laws being added each year, the burden on landlords is huge. On the horizon is the Renters Reform Bill which will remove the no fault evictions. Also, all rental properties with an Energy Performance Certificate (EPC) rating of below a ‘C’ will have to be improved (i.e., money spent on them) by the landlord. This could be more than £10,000 per property. Hence, why some Tunbridge Wells landlords have been selling their rental properties with low EPC ratings in the last 18 months. 

5. Accidental Landlords Selling Up

There are some Tunbridge Wells landlords who are classed as ‘Accidental Landlords’. In 2008/9, with a slowing property market and house price values dropping in the order of 16% to 19% (depending on the type of property) some Tunbridge Wells homeowners decided to let their home out as opposed to selling it at a loss. Yet, with the price booms of the last 18 months, many decided to cash in on the higher property prices and sell - again taking another private rental property out of the system.

So, why is demand of private rented homes in Tunbridge Wells increasing, even though more people own their home in Tunbridge Wells than 5 years ago?

Even with better provision of affordable social housing and higher rates of owner occupation in Tunbridge Wells (rising from 59.2% of homes in Tunbridge Wells being owner occupied in 2017 to 61.4% in 2021), demand for private rental property continues to outstrip supply. 

There are many reasons behind this including:

1. People are living longer, meaning not so many properties are coming back into the mix to be recycled for the younger generation.

2. Net migration to the UK has continued at just over a quarter of a million people a year since 2017, meaning we need an additional 115,000 households to house them alone.

3. For the last two years, one in six of the owners of properties that have been sold have moved into rented accommodation instead of buying on because of the lack of properties to buy.

So, what is the outcome of the imbalance between supply and demand on Tunbridge Wells rental properties?

Quite simply - Tunbridge Wells rents have rocketed. They are 5.6% higher today than the spring of 2020 … and that’s on the back of rents being 6.3% higher in spring 2020, compared to spring of 2019.

The severe shortage of housing in the private rented sector is pushing up rents in Tunbridge Wells as demand continues to grow. Many Tunbridge Wells people are finding it hard work to find appropriate accommodation at a reasonable rent, and with mounting numbers of tenants predicted to continue, this situation will only get worse unless more houses are built.

My heart goes out to those Tunbridge Wells tenants struggling with the cost-of-living crisis, only to then be hit by higher rents.

Yet, these higher rents are now enticing new landlords back into the Tunbridge Wells buy-to-let market because of the higher returns.

With higher inflation, property investment has been seen in the past a safe harbour to invest one’s money in. With the bonus of rising yields (because of the increase in rents) together with the nervousness of the Bank of England to increase interest rates too much because of the issues in Eastern Europe, this could be the start of a second renaissance in the Tunbridge Wells buy-to-let market.

If you have concerns about the issues in legislation and taxation, then the advantage of employing a letting agent, with the choice of property, what you pay for it and how it’s managed, will go a long way to mitigate them. 

If you are considering getting into the Tunbridge Wells buy-to-let market for the first time or expanding your property portfolio (whether you are a client of mine or not) please do not hesitate to give me a call and we can discuss these matters further.

How Will Rising Inflation Affect the Tunbridge Wells Property Market in 2022?

 

The UK is currently experiencing its highest inflation rate since the early 1990s. This increase in prices has primally come about by the combination of an increase in demand for goods and services from consumers following lockdown last year together with global supply chain disruptions.

Most economists weren't too concerned about this increase in the inflation rate as the very same thing happened in the early 1990s following the Credit Crunch with a similar rise in demand and supply chain issues. Thankfully, back in the early 1990s, inflation returned to lower levels quite quickly. However, the situation in Eastern Europe now could change matters.

So, let me look at all the factors and what it means for the Tunbridge Wells property market.

The crisis in Eastern Europe has sparked even further rises in crude oil, (which diesel and petrol are made from) gas and grain prices as pressure on supply chains around the world increases.

In my previous articles, I suggested UK inflation would rise to around 7% in the spring and drop back to 5% in the autumn and as we entered 2023, be approximately 3% to 4%.

Yet, with these issues, inflation could rise to 8% to 9% by late spring and still be around 6% to 7% in autumn, well above the Bank of England's target of 2%.

With Tunbridge Wells wages rising at only 3% to 4% and inflation at 7%+,

Tunbridge Wells household incomes, in real terms, will fall.

This is because ‘real’ UK household incomes characteristically have been the most consistent lead indicator of growth (or a drop) in house prices. This is because growing inflation erodes the value of money you earn, which reduces its buying power. When the cash in your pocket has a lower spending power, people tend to spend less when they buy (and rent) a home (and vice versa).

Next month, Income Tax thresholds will be frozen, and National Insurance contributions are increasing. Collectively, all these issues will create a drop of around 2% to 2.5% in the real disposable incomes of Britain's households in 2022 (real disposable income - somebody's take-home wages after tax and then the effects of inflation are considered).

Will Tunbridge Wells people be more anxious to spend their money?

With less money in people's pockets, people's inclination to spend the money they do have could also be curtailed. People's savings are at an all-time high, yet many will decide to sit on the cash, instead of spending it, especially as consumer confidence has dropped to minus 26 on the GfK index (whatever that means – but in all seriousness though - more on that below).

All this can only mean there is going to be a house price crash.

It’s all doom and gloom! … Or is it?

My heart goes out to people caught up in the awful humanitarian crisis in Eastern Europe. Yet, I respectfully need to put that to one side for just a moment for the purpose of this article.

This blog is about the Tunbridge Wells property market, and Tunbridge Wells people want to know what will happen to the Tunbridge Wells property market.

In the first half of the article, I looked at the impending fall in real disposable incomes of 2% to 2.5% in 2022. I appreciate it's going to be tough for many families in Tunbridge Wells. Yet, it is always important to consider what has happened in previous times.

1982 – a drop of 2.3% in real disposable income

1992 – a drop of 3.7% in real disposable income

2008 – a drop of 5.8% in real disposable income

Yes, it's going to be tough, yet we got through 1982, 1992 and 2008 – and so we shall in 2022/23.

Next, the price of petrol is very high compared to a year ago.

The average price of unleaded petrol is £1.51/litre today, quite a jump from the £1.21/litre a year ago. But, here is an interesting fact, petrol was a lot more expensive (in real terms) in 2011 than today. In TODAY's money, a litre of unleaded petrol in 2011 would be the equivalent of £1.79/litre.

We have some way to go before we get to those levels – and again, the Tunbridge Wells economy (and property market) kicked on quite nicely after 2011.

What are Tunbridge Wells people spending on their rent and mortgages?

Housing costs - owner occupiers were spending on average 17.3% of their household income on mortgages in 2015, yet in 2021 this had risen, albeit to 17.7% - not a huge increase.

Council house (social) tenants have seen a drop in their rent from 29.2% in 2015 to 26.7% in 2021, whilst private tenants from 36.4% in 2015 to 31.2% in 2021.

Interesting that private tenants are proportionally 14.29% better off in 2021 than in 2015.

How we spend our money - the average UK home spent 4.2% of their household income on energy in 2021, and that is due to rise to 6.3% after April (and probably 7% in October). Yet, as a country, we spend 9% of our income on restaurants and hotels and 8% on recreation and culture. As with all aspects of life, it will mean choices, and maybe we will have to forego some luxuries?

Just before I move on from this aspect of the article, again I appreciate I am talking in averages. Many people with low incomes suffer from fuel poverty and they will find the increases in energy prices hard – my thoughts go out to you.

Interest rates - higher inflation is generally brought under control using higher interest rates, meaning mortgage payments will be higher.

First, 79% of homeowners with a mortgage are on a fixed rate, so any rise won't be instantaneous. Yet, there will be a bizarre side effect from the issues in Eastern Europe. Surprisingly, though the current situation in Eastern Europe, by its very nature, will bring greater UK inflation, it will also probably defer the Bank of England raising interest rates. This means mortgage rates won't increase as much as the bank won't want to exacerbate any pressures to the UK economy in 2023/24 caused by the conflict.

The stock market had priced an interest rate rise to 2% by the end of 2022. I suspect this will now be no more than 1% to 1.25% by Christmas, slowly going up in quarters of one per cent every few months. The crisis in Eastern Europe might even come to be seen as a defence for higher inflation throughout 2022, all meaning everyone's mortgage will be less.

Next, looking at Consumer Confidence Indexes - these indexes are fickle things. I prefer to look at the Organisation for Economic Co-operation and Development Consumer Confidence Index as it has a larger sample range and a longer time frame to compare against. Looking at the data from the mid 1970s, the drop in consumer confidence is big, yet nothing like the drops seen in the Oil Crisis of the mid 1970s, Recession of the early 1980s, ERM crisis of 1992 and the Global Financial Crisis of 2008/09. Also, when compared to the other main economies of the world (G7), the UK has always bounced back much more quickly from recessions when it comes to consumer confidence.

What about house prices in Tunbridge Wells in 2022/23?

Increasing energy prices, rising inflation, an increase of sanctions, and a probable drop in consumer confidence and spending in the aftermath of the conflict will knock the post-pandemic recovery globally, which will lead to a recession around the world, including the UK.

A recession is when a country’s GDP drops in two consecutive quarters. For the last 300 years, there has been a direct link between British house prices and GDP – (i.e. when GDP drops, UK house prices fall). Yet in 2020, the British GDP dropped by nearly 12%, yet house prices went the other way.

But, let’s look at what would happen if Tunbridge Wells’ house prices did drop by the same extent they did in the Global Financial Crisis of 2008/09.

House prices in Tunbridge Wells dropped by 18.1% in the Global Financial Crisis, the biggest drop in house prices over 16 months ever recorded in the UK.

The average value of a property in Tunbridge Wells today is £419,429.

Meaning if Tunbridge Wells' house prices dropped by the same percentage in the next 16 months, an average home locally would only be worth £343,512.

On the face of it, not good – until you realise that it would only take us back to Tunbridge Wells house prices being achieved in April 2016.

Yes, that will mean if they do drop in price, the 8.9% of Tunbridge Wells homeowners who have moved home since April 2016 would lose out if they sold after that price crash. But how many people move home after only being in their home for a few years? Not many!

The simple fact is that 91.1% of Tunbridge Wells homeowners will be better off when they move if house prices crash.

And all this assumes there will be a crash.

The simple fact is, the circumstances of 2009 that caused the property crash are entirely different to 2022 (no lending by the banks, higher interest rates and increasing unemployment compared to today’s increased lending, ultra-low interest rates and low unemployment environment).

I do believe with all that's happening in the world we might see a rebalancing of the Tunbridge Wells property market later in 2022 and could see the odd month with little negative growth in house prices, yet it will be nothing like 2009.

The expected fall in household spending could be counterbalanced by UK businesses’ plans to invest more in their businesses (with last year’s tax breaks on investing), which will create even more jobs.

Who knows what the future holds? These are just my opinions – what are yours?

Royal Tunbridge Wells Homeowners Pocketed £341k Each in the Last 20 Years

​

• The average house price in Tunbridge Wells has increased by 176.9% to £533,000 in the last 20 years, a profit of £340,500

• That means, when adjusted for inflation in those two decades, Tunbridge Wells house prices have risen in real terms by 104.8%

• What does this mean for existing Tunbridge Wells homeowners and first-time buyers trying to get on the Tunbridge Wells property ladder?

Since 2001, UK average house prices have risen by an astonishing 187.2% across the UK, while in London the figure is 247.6%. 

Looking back at the people that bought in those first few years of the new Millennium, few of those buying or selling property in 2001 could have forecast the massive financial impact that their decision then would have on the rest of their lives. 

In those years, there have been winners and losers, where some Tunbridge Wells buyers have made hundreds of thousands of pounds and Tunbridge Wells renters have paid out tens of thousands of pounds and yet been unable to buy their first home – but life is often not as simple as that, so in this article I wanted to discuss the matter further.

The average house price in Tunbridge Wells has increased by 176.9% to £533,000 in the last 20 years, a profit of £340,500.

Now of course these are average prices and don’t take inflation in to consideration.

Yet even when adjusted for inflation, Tunbridge Wells house prices have still risen by 104.8% in the last 20 years.

Characteristically, the longer a homeowner has owned their Tunbridge Wells property, the larger the gain when they sell. Yet most of these profits are never seen by Tunbridge Wells homeowners. It has never been money in the bank unless you sell up and downsize or move somewhere cheaper. Instead, these gains are re-invested back into the housing market when they buy their next home.

So, whether the gains are banked or tied up in their bricks and mortar, it looks like all the Tunbridge Wells homeowners are in the driving seat.  

What about all the Tunbridge Wells first-time buyers, priced out of the market and unable to get on to the property ladder? 

Are the young of Tunbridge Wells losing out again?

Reading the newspapers you would think so, yet nothing could be further from the truth. In fact …

It’s 22.8% cheaper today to buy a house

in Tunbridge Wells compared to 2007

That isn’t a typo!

In 2002, 28.4% of a first-time buyer’s household income went on the mortgage payments. Today, that figure stands at 37.7%, yet in 2007, it was 48.8% ... hence why it’s cheaper today!

Of course, for most young Tunbridge Wells potential first-time buyers, the other largest barrier to home ownership is the matter of raising an adequate deposit.

Rising rents (and future energy prices) won’t help and will in fact make this problem worse, giving ambitious Tunbridge Wells first-time buyers not much left at the end of the month to save a deposit for their first home. 

With soaring Tunbridge Wells house prices, this means the amount Tunbridge Wells renters need to save for their deposit is growing year on year. 

For these annoyed renters, there is the unpleasant irony that if they could only get on the Tunbridge Wells housing ladder, they would find themselves better off. They would spend a lower proportion of their monthly take home pay on keeping a roof over their heads. 

Some people in the press have suggested the older generation, with all the equity tied up in their homes over the last 20 years, should release some of the money and give it to their children or grandchildren to help them on the ladder, maybe?

Reports in the press have also described many homeowners in their 60’s (and older) changing their plans to move home. Many were planning to downsize, to release the tied-up equity in their home. That equity would either be used to invest in the bank to produce an income for them and/or to help their children (sometimes even grandchildren) on to the property ladder.

Yet with the interest paid by banks and building societies on any lump sum being very low, to many mature homeowners it hardly seems worthwhile making the move to downsize. This means many younger would-be first-time buyers are missing out on help from the Bank of Mum and Dad (or the Bank of Grandad and Grandma) with their deposit.

However, the problems caused by low interest rates could also be their saviour.

Many older homeowners have turned to equity release, thus allowing them to get hold of a share of the equity amassed in their property, in exchange for a tax-free lump sum of cash.

Cash that could be used to help with

deposits for their children/grandchildren?

The mature homeowner then stays in their larger family home and helps their family buy a property. 

Whilst I am not a mortgage adviser (and you must take proper advice from a qualified mortgage broker), equity release mortgages don’t have end dates and the interest payments are rolled up (until you pass away). This means that there aren’t any monthly payments. 

The interest rate you pay is normally fixed for the mortgage and because interest rates are so low, that means the debt shouldn’t balloon up. And should you decide to sell in a few years’ time, you just pay back the capital, redemption fee and the small amount of interest accrued.

Now of course, that does mean there will be less for

your offspring to inherit when you pass away.

Equity release mortgages though have had some bad press recently.  In the past they were unregulated and pricey. Yet today, there is more protection for borrowers.

One answer to the growing interest debt is to pay part or all the monthly mortgage interest charged, yet you must have the income for that. 

You also need to take advice on how the equity release will affect your liability for nursing home fees and inheritance tax. Also, if only one person in your home is the owner of the property, if that homeowner dies, the partner who is not on the mortgage (because only owners can go on a mortgage) won’t have any rights to stay in the family home. 

Finally, if you are planning to move, don’t just compare the interest rate, but the redemption charge for early repayment – some of them can be very high.  

My advice – take professional advice and speak to your family and involve them. Yes, we have all built up some amazing equity in our Tunbridge Wells homes, and yes, there is potential to help the younger generations with that wealth. Just go in with your eyes open and know all the facts, all the pros and all the cons – then decide what is best for you with all that information to hand.

What are your thoughts, as a mature Tunbridge Wells homeowner or a first-time buyer, on this? It would be good to hear from you.