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May 11, 2012

Phyllis, 93, has to Take Out a New Equity Release Mortgage Just to Stay in Her Home (UK)

 Phyllis, 93, has to take out a new equity release mortgage just to stay in her home. And she's far from alone...
By Larisa Brown
8 May 2012

Phyllis Wallbank, 93, has applied for a lifetime mortgage after she was sent a care bill from her council for nearly £5,000.
Mrs Wallbank (pictured below in her youth), who is too frail to feed herself, struggled to pay for the carers who help her with meals three times a day.
With only £300 in her bank account and desperate to stay in the comfort of her own home, she applied to release £10,000 equity from her £650,000 cottage.
Sadly, Phyllis is just one of those whose prudence is being punished in their old age.
Phyllis says: ‘I’m having to borrow against the house to pay to be fed. I worked very hard to buy this house, I saved every penny. Now my children will be left with hardly anything.’
The widower, who has lived in her cottage in Dorney, Buckinghamshire, for almost 70 years, and who has three children, adds: ‘I don’t want to go into a home — I would loathe it. I want to be here, where all my memories are. This way I can keep independent. I want to die here looking at the birds and enjoying the view.’
The elderly eating into their homes to pay for care
Soaring care costs and plunging pension payouts are forcing the elderly to take out expensive equity release mortgages to pay for care in the home.
Thousands of pensioners are — as a last resort — being forced to tap in to the wealth built up in their property as a way of spending their final years in the comfort of their own home.
One in ten of all pensioners releasing equity from their homes are now doing so to pay for care, according to figures from specialists Key Retirement Solutions — one of the biggest firms offering equity release.
In total, these pensioners took an estimated £78 million over the past year. Just 12 months earlier, only a handful of elderly had used equity release to pay for their care bills.
Dean Mirfin, group director at Key Retirement Solutions, says: ‘Releasing equity to pay for care in the home is quite a new phenomenon and it has rocketed in the past eight months. A year ago we saw very few people using this scheme; now we are looking at roughly 10 per cent.
‘Equity release can be the difference between being able to afford care in the home and having to go into a retirement home.
‘It’s a way of unlocking your  money when your wealth is tied up in the home.’
Who pays for care?
There are 417,000 elderly people in the UK receiving care at home, whether privately or through their local authority. A further 73,000 receive direct payments from their council to allow them to arrange their own care. And 388,000 more are in nursing or residential homes.
By 2025 the number of people expected to need long-term care is due to hit 1.1 million.
The average cost, whether in the home or in residential care, is currently £26,000 a year — and is expected to  rise to £33,000 per annum in 13  years’ time.
Currently, elderly people have to pay for care at home only if they have financial assets of more than £23,250. The value of their home is only considered for those moving into a care home.
But under a proposal in a report by Andrew Dilnot on the future of care services (as part of the Commission on Funding of Care and Support set up in 2010), someone’s property would also be included in the means test for receiving care in the home.
Why are people using equity release?
If the report is accepted by MPs in June, it could see more elderly people turning to equity release.
But this is a complex product, so it’s vital to understand how equity release  works in order to understand the costs.

 Abridged
SOURCE:      This is Money, UK
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