Despite falling house prices, homeowners aged 65 and over still have a whopping £611.5bn of equity in their properties - meaning there is still plenty of room to manoeuvre when it comes to arranging their finances.

The latest findings from Prudential's equity release index revealed that the significant amounts of property equity contrast with the current squeeze on retirement income being seen in today's volatile market - even in the face of the huge equity calculation, it found that the value of property equity belonging to homeowners aged 65 and over fell by £80.6bn between October 2008 and January 2009, with the average homeowner over 65 seeing the value of equity they have in their home fall by £21,377.

This proves, even in a downturn and even with falling house prices, if you have worked all your life to pay your mortgage your home is worth a lot more than you might think.

Keith Haggart, director of Lifetime Mortgages at Prudential says: "Every homeowner is being affected by falling property prices, but it's important to remember that many people, especially retired homeowners, bought their homes years ago and have benefited from growth in the housing market.

"They will in many cases not want to move home and in the current market the option of downsizing and raising money is less attractive when prices are falling and houses take longer to sell. The emotional wrench of moving house may be worsened by the financial loss of having to cut your price in a slow market. Equity release has an important role to play in providing retirement income particularly when other sources are under pressure."

Equity release is one option if you are looking to use some of your collateral, but there are always other options - if you have plenty of equity in your home, the door is always open for you to refinance, seek new finance altogether or invest in a healthy, successful savings vehicle.

The only thing you need to do if you are in a equity-rich situation is to get advice immediately. Your equity is your biggest asset, and one that should be able to see you right through your retirement. So make sure you don't needlessly lose any of it by not listening to a professional financial professional.

SOURCE: Prudential Equity Release, 22/04/09

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Although the Council of Mortgage Lenders revealed that more than one million people could be in negative equity, the message is clear - don't fear negative equity.

The news and the media might be predicting the apocalypse as a result of the worrying statistics, but there is nothing to fear if you are in negative equity. It simply means you will probably do well to stay where you are, save hard and keep on top of your debts - because when the housing market picks up you might find that you are out of negative equity very quickly.

It's a common myth that negative equity leads to repossession, which simply is not true. Many people who are in negative equity may have a very low mortgage rate right now, meaning they are comfortably paying their loan each month. This means the lender is happy, your credit score improves and you are in a good position to be able to access a good mortgage when things improve.

But negative equity doesn't mean you should be complacent - while you are waiting for the market to improve, you should do all you can to make the most of your money. That means overpaying on your mortgage if you can (which fights negative equity), it means doing all you can to reduce your other debts and it means building up a nest egg for when times get better.

Negative equity is a fact in this downturn, but it is not something that should keep you up at night. House prices will improve and mortgages will become more accessible - it's just a matter of biding your time, taking good advice and putting together a plan of careful spending.

SOURCE: CML, 16/04/09

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Almost one million people could be in negative equity across the UK, according to a study by the Council of Mortgage Lenders.

It says at the depth of the last housing market recession in 1993, 1.5 million households or more were estimated to have negative equity, and that number is creeping back up with 900,000 homeowners now in a position where their mortgage is worth more than their home.

A new research article by James Tatch, senior statistician at the CML, suggests that of the 900,000 home-owners currently have some degree of negative equity, the majority of these - around two thirds - face only modest shortfalls of less than 10%. This equates to around £6,000 for those first-time buyers with negative equity, and £8,000 for other home-buyers.

The CML says that in the last downturn, most people sat tight, saved, continued to pay their mortgages and eventually recovered their equity position - exactly what most of today's borrowers with reduced or negative equity are also doing.

The mortgage lender group also urged people not too be too downhearted about the numbers - while reduced and negative equity are likely to constrain the ability of affected households to move house, even in today's weaker market, the CML estimates that home-owners still have around £2.1 trillion of unmortgaged housing equity.

Bob Pannell, CML head of research, says: "Although negative equity has resurfaced as house prices have fallen, one big difference from the early 1990s downturn is that it is less concentrated among young, first-time buyers, and more evenly spread across wider age groups and those at different points on the housing ladder.

"Negative equity will contribute to subdued property turnover, but otherwise should have few adverse effects for the majority of households affected. Where people needs to move house for job or other priority reasons, lenders can often be flexible to existing borrowers with low or negative equity, as long as their financial position is sound and they have a good payment track record.

"Otherwise, sitting tight and building up savings or overpaying on the mortgage are the strategies most borrowers are likely to adopt. It should be easier for households to rebuild their equity position than in the early 1990s, as low interest rates on their mortgage can help them to save or overpay more quickly."

SOURCE: CML, 16/04/09

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It's another holiday and another time where you could spend more than you can afford - we all do it - but if you are doing it on your credit card it might be time to reassess.

Over the last few years you probably couldn't open your door due to the sheer number of requests for credit cards - 0% APR, free for a year, free balance transfers, limits of thousands of pounds - it was literally free money landing on your doorstep.

And you could always afford the cards, because you knew when the time came you could either transfer your balance onto another card, or simply use this time as an opportunity to refinance your home and consolidate your debts.

But the party is over, and the hangover is setting in. People who used to live on credit are finding that their overdrafts and credit limits are being severely reduced, and people who just looked to a remortgage as a means of consolidation are finding that they are being turned down for home finance.

So if you haven't yet stopped living on your credit card, it might be time to rethink. Every time you use your plastic, your credit score is deteriorating and you are taking one step back from financial security. There is little chance of getting instant finance or extensions of credit limits. Now is the time to take sensible action.

This has to start with good financial advice. Go and see an adviser and lay it all out on the table: your spending habits, your debts and your financial problems. This might seem daunting but it is the only way you can stop living on credit and begin saving, planning and repaying.

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The Office of Fair Trading has launched a investigation into the unsecured financial sector to make sure it is working as it should with borrowers during the recession.

It says its priority is to promote fairness and responsibility between the credit industry and consumers, and advocate choice and competition to ensure that public decisions made to deal with the current crisis do not harm competition in the long term to the detriment of consumers.

Currently, the secured lending market is regulated by the OFT, and until the Financial Services Authority decides to bring secured lending into its jurisdiction, then any decisions it makes will affect secured loans.

John Fingleton, chief executive of the OFT says: "Much of our work is already aligned with the needs of consumers, business and the economy in the current crisis but this strategy will sharpen our financial services focus over the coming year.

"With our focus on credit, we are addressing the area in which there is a real risk of short-term consumer harm while also ensuring that the sector that emerges from the current crisis is competitive and behaves fairly and responsibly towards consumers.

"Looking further forward, the financial services sector that emerges should be characterised both by effective prudential regulation and open markets. Choice and competition involving existing players and new entrants are vital to delivering growth, prosperity and a good deal for consumers. There is a risk that this could be overlooked in the re-design of financial regulations, with high costs for consumers and the economy."

This is great that the Government plans to make sure that the consumer is not harmed. But the consumer can do a lot themselves - making sure they only deal with secured loans through a reputable, authorised professional, and making sure they can afford what they commit to and making sure that every decision they make is for the long-term.

SOURCE: OFT, 07/04/09

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A new report has found that more than a quarter of those between 55 and 64 years of ageo are relying on their homes or property to help fund their future retirement.

According to uSwitch.com, almost 1.7 million pensioners are relying on property to fund their old age at least in part. Sadly, it says this group alone has already seen just over £46bn disappear from their retirement fund in just 12 months as the average house price has dropped by nearly £30,000.

This means more people will be looking to unlock secured equity from their home, in the form of a remortgage, a secured loan or even equity release.

But those who are approaching retirement age are concerned for their future plans - just over one in ten 55-64 year olds think that they cannot afford to retire. Worryingly, 18% of over 65s who are still working say that they cannot afford to retire either.

The implications of not saving enough or soon enough are clear - retirement could be delayed or even put on hold permanently, raising the spectre of working far beyond 65. Of those who have already retired, 20% had to delay their retirement - 8% of these had to carry on working for a further 5 to 7 years, says the website.

Ann Robinson, director of consumer policy at uSwitch.com, says: "Falling house prices coupled with the stock market crash and low savings rates have combined to take the wind out of the sails of many of those approaching retirement. The economic situation will hopefully right itself in time, but unfortunately time is a luxury those who are a few years away from retirement don't have.

"There isn't an instant solution, but that doesn't mean people should just bury their heads in the sand. They should still be planning and making sure that they are on the best financial footing possible.

The only way you can be more sure of your golden years is to act now. Talk to your financial adviser right away about making the most of your home, your savings and your pension. House prices will rise again, there is no doubt, the key is making sure you are as financially stable when the time comes to take advantage of the chance.

SOURCE: uSwitch.com, 02/04/09

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Last year was the year of investing into your home, not spending your equity - great news, proving people are in good stead for the year ahead.

The Bank of England estimate for home equity withdrawal for the last quarter of 2008 is minus £8bn. The negative figure implies that borrowers are investing into their homes rather than spending equity - that compares with a revised estimate of a net injection into housing equity of £5.9bn in the third quarter of 2008.

Rising house prices over this decade has encouraged people to refinance or take out secured loans to free up cash for other purposes, but housing equity withdrawal turned negative in the second quarter of 2008, meaning people are trying to save more than they spend.

Simon Rubinsohn, chief economist of the Royal Institute of Chartered Surveyors says: "Housing equity withdrawal fell for the third consecutive quarter in the final three months of 2008 with the £8bn drop amounting to a hefty 3.3% of post tax income. The constraint on household borrowing from the loss in value of residential property contributed in no small way to the one per cent decline in consumer spending in fourth quarter.

"The likelihood is that despite tentative signs of a stabilising in activity in the residential market, homeowners will find it difficult to resume extracting equity from property for the foreseeable future."

This means it's time to save, invest in your home and begin building up your equity. Talk to your mortgage adviser about improving your credit rating, your equity and your potential for the future.

SOURCE: BoE, RICS, 02/04/09

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According to the Government, a total of 46,750 properties in the UK were repossessed during 2008, which means thousands of homeowners and mortgage lenders lost out: because repossession is bad news for everyone.

The Financial Services Authority, the Government's finance watchdog, has reported a sharp increase of 68% in the number of properties repossessed in 2008 compared with 2007. The regulator’s results also showed a rise in the number of borrowers falling into arrears, up 31% from 2007 to 377,000 at the end of 2008. The number of properties being taken into possession during Q4 2008 was slightly lower than it had been over the previous quarter, but this was still 60% up on Q4 2007.

Roderick Logan, analyst at Datamonitor says: “For borrowers it means losing one’s home and could mean moving to fairly squalid living conditions. For lenders, taking possession of a property is likely to be followed quickly by an auction, where prices are likely to remain below the estimated market value as bidders are looking to make a profit and lenders will have no choice but to sell.

"For the government, there is the political aspect of families losing their homes and the negative press generated if they are perceived to be standing by and allowing it to happen. This has resulted in a raft of government initiatives that are being rolled out to help those borrowers deemed to be most at risk."

So this is bad news for everyone. So everyone needs to work together to avoid it. And this starts with you, the homeowner. If you are struggling with unsecured debts and bills, you need to talk to your adviser as soon as you can because missing bill payments should be the red alert warning sign. You should also talk to your lender and any local help services available to you, like Citizen's Advice.

Just do something. Repossession is the worst thing that can happen to a homeowner, so don't let it happen to you and act before it's too late - no one wants to see you repossessed.

SOURCE: Datamonitor, FSA, 25/03/09

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The Government has set out plans to regulate the advice and the sales of secured loans - a move which has been welcomed by many.

Right now there is no regulation of secured loans, unlike for mortgages, pensions and investments. The advisers do not have to be watched by the Financial Services Authority and neither do the lenders. This means if something goes wrong, and someone thinks they have been wrongly sold a secured loan, maybe nothing can be done by the authorities.

There is some people watching over secured loans: the Office of Fair Trading makes sure the sector broadly does what it should, but there are still holes so the Government wants to make sure things are watertight by ensuring the FSA look at secured loans as they would mortgages.

Robert Sinclair, director of the Association of Finance Brokers, says: "We fully support this announcement as we have long been calling for an alternative regulatory regime under FSA. This would benefit intermediaries, lenders and consumers."

You may have taken out a secured loan in the past, or you may be planning to take one out in the near future and knew nothing about the regulation of the industry - but it's something you should always be aware of. Regulation means protection and it means quality - without it you are always at risk.

So even though the secured loan market isn't regulated, make sure you deal with an adviser who is. Look for the FSA REGISTERED note on their website or their literature. Even ask them if they are authorised as a legal financial adviser - because that means honesty, quality and someone you can rely on.

SOURCE: AFB, 25/03/09

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As things get tougher during the recession, fears of unemployment and reduced income are natural - but borrowers must be prepared for anything, and a credit check is a central part of that preparation.

A credit check, which can be found on a number of online credit firms, which show you your credit history. It details everything you have ever borrowed, how you paid it back, whether you missed any payments and how much you currently owe.

It's crucial to check this because you can see exactly what your financial position is - whether you could be able to get finance, whether you have past arrears. And you can, if necessary, edit your score. Explanatory notes can be added and mistakes can be rectified. But there are other things you should be doing to make sure you can weather any storm.

Set to a budget and stick to it. Don't make it too frugal, because it will become unattainable, but make sure you are saving enough to pay debts, cover repayments and even invest into a savings account.

And if you are planning to use unsecured debt like a new credit card, think carefully about how you would manage the repayments if interest rates start to rise again, or if you suddenly find yourself out of a job. This is especially important in the case of mortgages and secured loans where your home is at risk.

Owen Roberts, head of www.callcreditcheck.com, says: “As redundancy becomes a real possibility for more and more people in the UK, people need to keep a closer check than ever on their finances. Our own research has shown that 28% of adults in relationships could not last more than two months on savings if their partner lost their job. Checking your credit report will give you a comprehensive overview of all your financial commitments and can highlight where you can make savings in order to best cope with any unexpected changes in your financial situation.”

SOURCE: Callcreditcheck.com, 18/03/09

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