Published: 11:47 AM, Mar 31, 2022
Photo by marco barsotti on Unsplash
The wealth effect is an economic theory that when a person's wealth increases then they go out and spend that money accordingly. With the consumer, physically boiling to get out an enjoy life after the last 2 years, is probably looking upon a nice increase in home equity like a hungry man views his plate of steak and chips as it is brought to the table.
But is it ethical to promote this growth as the free money we like to pretend it is? We could of course view this growth as not growth at all, it simply reflects the drop in the value of money, and what we are spending is simply reducing our asset value when it is the thing we should be holding onto in times of inflation and monetary expansion.
But thinking like that never got anyone a new Audi and a cruise in the Bahamas so we have products like secured loans and equity release for good reasons. Sometimes just to enjoy life.
As someone who has worked in the promotion of equity release it's a job you need tough skin to have, the abuse is quite constant and very bitter. I've witnessed grown men get fairly upset reading comments made on social media directed towards staff.
Accusations of robbing grandmothers and physical threats are quite common.
So I have been heartened to see positive news in the press recently of the product enhancing people's lives in this post covid period.
The rules for advising on equity release are quite a bit more involved and require the extra certification beyond the mortgage advisor qualification. I've always felt safe seeing these products promoted by trained advisors with the enhanced level of regulation they fall under.
With flexible drawdowns, repayment options and still very low interest rates for consumer looking to release equity with a lifetime mortgage then some may feel the time is right for this product.