Nearly half of all estate agent have seen an increase in the number of vendors forced into a sale to pay off interest-only loans over the past two years, an equity release firm has claimed.
Based on its analysis of Council of Mortgage Lenders data, equity release firm Key Partnerships says the number of interest-only mortgages has decreased by a third since 2012, a trend created by the number of home owners looking to clear their outstanding mortgage debt via ‘forced sales’.
But if agents can’t sell these homes in today’s sluggish sales market, Key Partnerships says agents should consider offering them finance packages that enable them to stay put rather than lose the sale to another agent.
These ‘forced sale’ vendors are the borrowers who took out interest-only loans 20-plus years ago but whose investment strategies have failed them or who never bothered to set up funds to pay off the mortgage debt when they stopped working.
Key Partnerships says another 10,000 such sales are due to take place over the next three years and that most will be by older customers as they try to pay off their outstanding interest-only mortgages.
Three quarters of those downsizing from larger homes to smaller retirement properties are not looking for smaller but instead are forced sales, it says.
Key Partnerships spokesman Will Hale (pictured, left) says equity release can also be an option for couples who are divorcing but who are struggling to sell their home, and for grandparents or parents looking to release capital to help young first time buyers on to the property ladder.
Research by Key Partnerships also reveals that, while nearly two thirds of home movers want advice on mortgages, only half of them know about the alternatives to forced sales. It also found that half of all agents would suggest equity release as a solution if they had a partnership with an independent expert adviser.
“Estate agents are valued as a source of financial guidance and those [who] who can discuss equity release as an alternative to selling will be able to benefit from an additional revenue stream by referring potential clients to a specialist,” says Will, who says Key Solutions is increasingly focussing on customers referred to it by estate agents.
In return for a referral, intermediaries earn on average £1,319 on completion of the loan, the company says.