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Should elderly sell homes to fund care?

In a story reported by the Observer[1], elderly citizens who face high social care costs should sell their homes in order to cover their care bills, according to Theresa May’s director of policy, John Godfrey.

Godfrey is quoted as telling an independent commission “On a 10-year view … equity release is going to be hugely important, because if you look at the amount of housing equity across the UK that is owned by people of post-retirement age, that is really where an awful lot of the money sits at the moment… Can people either downshift or liberate some of that money through equity release to fund their living costs?”

Equity release involves borrowing against the value of a home or selling all or part of it for a lump sum or a monthly income.

The article points to research which found that one in 10 people end up paying more than £100,000 in care costs in old age.

The statements by Godfrey are at odds with the views of Jeremy Hunt, Secretary of State for Health, who said in 2013 it was a scandal that every year “30,000 to 40,000 people are having to sell their houses to pay for care costs”

Earlier in 2016 the Telegraph[2] reported that four out of five people whose main asset is their home are selling up in order to meet care bills. In addition, Councils are failing to tell families of arrangements whereby they can keep their homes and go into care. Councils are required by law to offer deferred payment arrangements, which allow people to borrow money to pay for care against the cost of their home. The council lends the money and charges a low rate of interest which is paid, along with the capital borrowed, typically at the homeowner’s death.

Of course, anyone considering these options needs to take into account the knock-on effect of a reduction in their estate and the implications this could have for passing on inheritance to family members.

[1] The Guardian (2016)

[2] Telegraph (2016)

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