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To Buy or Not to Buy! Property Experts Discuss Whether Buyers Should Buy Now or Wait Until 2022

This month property prices rose once again, by £2,509, resulting in the average price of a home in the UK rising to an all-time high of £336,073. With the price increases and the end of the stamp duty tax break, many buyers are asking whether this is the time to buy or would it be more prudent to wait until 2022.

The property market has been somewhat chaotic over the past few months, mostly due to the pandemic and the stamp duty holiday. However, there are early indications that the market is starting to slow down and normalise. The monthly house price index report by Rightmove showed a 0.8% rise in June, down from a much higher 1.8% increase seen in May. April had showed an even bigger leap of 2.1% according to the report.

Rocketing prices were attributed to the demand that increased for properties during the stamp duty holiday as well as the extremely low interest rates on offer. With the tax break coming to an end the demand has significantly decreased and property prices are expected to stabilise.

On July 1st stamp duty threshold will change to £250,000 and from October 1st it will return to £125,000.

Ask the Experts

Experts give their professional opinion on whether now is the right time to buy or if it is better to hold off for now.

Moneyfacts’s finance expert, Rachel Springall, commented that the impact on first-time buyers and people looking to remortgage will be different. Remortgagers will find they have more equity than they had before, whilst first time buyers will need to save larger deposits due to increased house prices.

She also explained how new homeowners may find themselves in negative equity if prices were to drop in the near future.

She explained: “If first-time buyers have a 5% deposit to get their foot onto the property ladder, then they will find deals returning to the market after a notable absence.

“However, whether it is the right time for them to commit must be considered carefully because house prices could fall and leave borrowers in negative equity.

“Borrowers who have a limited deposit or equity may wish to spend more time building a larger pot and wait a little longer before they commit to a mortgage.”

Rachel also advised that a bigger deposit attracts lower interest rates when it comes to getting a mortgage. A two year fixed rate mortgage with a 10% deposit works out at 0.53% lower than the same but with a 5% deposit.

She said: “Clearly, stretching to just 5% more could entail some substantial savings on mortgage repayments by moving down the next loan-to-value bracket.”

She added that she would advise caution when it came to considering the sub-1% mortgages and to ensure to check all fees and any additional costs before committing. She left off saying that it is really down to individual circumstances as to whether now is the time to buy or not.

Hargreaves Lansdown’s, personal finance analyst, Sarah Coles, stated that she felt that house price drops in the short-term were “not the end of the world” if you expect to live in the property over the long term. However, she advised buyers to be aware of bidding wars and to not pay more than they wanted to, in which case it may be better to wait.

Sarah added: “Likewise it might make sense if you haven’t saved enough of a deposit to make the mortgage affordable, or if you’re concerned about the immediate outlook for your job.

“But there similarly might be very good reasons to get on with it, especially if you’re living somewhere that’s making you or your family unhappy.”

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Historic Global Tax Agreement Reached by G7 Finance Ministers

On June 5, G7 finance ministers reached an historic global tax reform agreement, fulfilling the promise of chancellor Rishi Sunak to ensure the world’s biggest international businesses make an appropriate contribution.

Key details of the agreement reached at the G7 summit:

  • G7 Finance ministers strike seismic agreement on global tax reform that will mean the largest multinational tech giants will pay their fair share of tax in the countries in which they operate.
  • Following two-days of talks chaired by Chancellor Rishi Sunak in London, counterparts agree to reforms which will see multinationals paying tax in the countries where they do business.
  • As part of landmark deal, finance ministers also agree to the principle of a global minimum rate that ensures multinationals pay tax of at least 15% in each country they operate.
  • Nations also agree to follow UK lead in making climate reporting mandatory and agree measures to crack down on the proceeds of environmental crimes.

Source: Gov.uk

The culmination of several years of discussions, finance ministers from the G7 nations reached an agreement that will see major international companies face fair tax obligations in the countries in which they do business. It was also agreed that multinationals should pay a global minimum tax rate of at least 15% in every country they operate in.

Speaking after the event, Chancellor Rishi Sunak commented on the significance of the landmark agreement and its positive impact for the UK economy.

“These seismic tax reforms are something the UK has been pushing for and a huge prize for the British taxpayer – creating a fairer tax system fit for the 21st century,” he said.

“This is a truly historic agreement and I’m proud the G7 has shown collective leadership at this crucial time in our global economic recovery.”

Further Focus on Environmental Issues

It was also agreed at the meeting that G7 leaders should follow in the footsteps on the UK, by demonstrating genuine commitment to the integration of climate change prevention and biodiversity preservation in all the aspects of financial and economic decision-making.

Since the creation of the Task Force on Climate-Related Financial Disclosures (TCFD) six years ago, the United Kingdom has played a major role in ushering G7 nations in a more proactive direction where major climate issues are concerned. Specifically, the UK has encouraged and inspired the G7 to make climate disclosures mandatory across their respective economies.

Support for Vulnerable Countries

G7 ministers also pledged to offer additional support to poor and vulnerable countries worldwide, furthering the group’s milestone backing of $650bn general allocation of Special Drawing Rights (SDRs) earlier this year.

Further details on the agreements reached and the meeting can be found on the official Gov.uk website, while images of the historic summit have been published on HM Treasury’s official Flickr page.

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Mortgages Other Finance News

Paragon Bank Predicts Buy-to-Let Boom, Reports Impressive Half-Year Profits

The UK could be headed towards another major buy-to-let boom, as wealthy investors and entrepreneurs seek to take advantage of skyrocketing property prices. According to Paragon Bank, new and established buy-to-let investors alike are looking to snap-up desirable homes ahead of a seemingly inevitable spike in demand for private rental properties.

As rapidly rising property prices continue to price families and first-time buyers entirely out of the market, millions are being forced to seek indefinite private rentals. Subsequently, Paragon Bank has reportedly set aside £927 million in loans for buy-to-let investors and entrepreneurs.

“There are a lot more families renting property than there ever was in the past,” commented chief executive Nigel Terrington, acknowledging how difficult it is becoming for UK residents to get on the property ladder.

“There is a bit of a culture in the UK which is our job in life is to grow up, get married and buy a house. That is changing. We don’t have to buy a car or a phone, we can lease them. Housing is the same.”

Paragon also reported impressive half-year profit growth of 45% to hit £83 million, making the bank’s shares the biggest riser on the FTSE 250.

“I am incredibly proud of these results. They reflect the hard work of our people during a challenging period as well as the success of our longstanding strategy to build a technology-enabled specialist banking group,” added Terrington.

“We have delivered record half-year profits and go into the second half of 2021 with strong momentum, healthy new business pipelines and enhanced margins,”

“Our people continue to excel, maintaining both productivity and flexibility as we look to develop options for the future operating model of the Group. We look forward to the second half with strong capital ratios, prudent liquidity and with growing confidence as the UK emerges from the Covid crisis.”

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Mortgages Other Finance News

Record-High Mortgage Lending Activity Recorded in Q1

Mortgage lending activity attributed to home movers reached an all-time high during the first three months of this year, as homeowners across the UK set their sights on more spacious homes with private gardens.

According to the latest figures published by the Financial Conduct Authority (FCA), movers accounted for 42% of total mortgage lending activity during Q1 2021. An enormous leap from the 27% recorded during the same period last year and the highest since records began in 2007.

Meanwhile, data from the Halifax indicates another significant spike in average house prices, potentially pricing many first-time buyers out of the market. The average market value for a UK home increased by more than £22,000 over the past year, reaching a new all-time high of £261,743 during May, according to the Halifax.

Consequently, the share of loans issued to first-time buyers during that time increased by just 2% compared to the same period in 2020.

Shifting Property Purchase Intent

Figures published by Zoopla indicate a major shift in property purchase intent among UK movers and buyers, which is not being matched by supply. This is resulting in significant increases in average house prices in key regions across the country, making it difficult for first-time buyers to find homes within their budgets.

Over the past four years, the number of 3- and 4-bedroom family homes available on the UK market has declined significantly each year. Meanwhile, more smaller flats with 1 to 3 bedrooms are currently on the market than at any point since 2017, as buyers set their sights on spacious homes away from busy urban centres.

The market is also being fuelled by the impending deadline of the government’s temporary stamp duty holiday. Even then, many economists and lenders believe that the momentum the real estate sector has built over recent months will carry it through until the end of the summer at least.

Even in the face of major economic uncertainty in the wake of the pandemic, official figures indicate the fastest average UK house price growth in more than a decade.

Strong Performance Throughout Q1

According to the figures published by the Financial Conduct Authority, total mortgage lending activity for Q1 this year was around 26.5% higher than the first three months of the year in 2020. A total of £83 billion was borrowed by the UK public in the form of mortgage products across all classifications.

Remortgaging activity fell significantly during the same period, having plummeted 14% compared to the same time last year – the worst performance for this section of the market since 2007.

Meanwhile, the share occupied by buy-to-let property owners remained relatively stable, while first-time buyer mortgage activity increased only slightly compared to last year.

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Completion Delays Puts 1000’s of Property Sales at Risk

The stamp duty tax break comes to an end at the end of this month leading to many home buyers standing to lose out on considerable savings. It is expected that 40% of sales agreed before April 1st will not complete in time, leaving around 160,000 buyers approximately £15,000 worse off. There are currently 704,000 sales going through the conveyancing process with many people unsure as to whether they will still be able to take advantage of the savings.

From the July 1st the stamp duty threshold will be reduce to £250,000 until the end of September when it will return to £125,000 for movers and £300,000 for first-time buyers.

Many buyers are left precariously balanced in the middle of property chains, afraid that if even one person pulls out, the entire chain may collapse, putting them thousands of pounds out of pocket.

With conveyancers working around the clock in an attempt to meet the deadline and average time for property checks running up to six months, it is highly likely that many buyers worries will become a reality.

‘It’s a stressful time for movers, and solicitors have been working 24/7 to meet clients’ wishes,’ commented, president of the Law Society of England and Wales, Stephanie Boyce.

‘Lots of factors came together creating a perfect storm of huge buyer demand.

‘Capacity is stretched across the board, from delays receiving mortgage offers, legal searches and unforeseen hold-ups further along the chain putting people at risk of not meeting the deadline.’

While there have been record house sales over the last few months the average time of completion is coming in at around 20 weeks. Conveyancers are working night and day to get through the backlog.

Director of delivery at the Conveyancing Association, Beth Rudolf, says: ‘Through no-one’s fault, there are a number of log-jams to be worked through. Some lenders currently have telephone hold times of two hours, and some valuers are not responding to post-valuation queries, which makes the time to get to completion lengthier.

‘We understand this is a stressful time for all those seeking to complete before the deadline, but rest assured conveyancers are working flat out.’

Local authorities are also reporting a similar situation when it comes to property searches being requested, which has, according to Mojo Mortgages resulted in a postcode lottery when it comes to meeting the stamp duty deadline. It was discovered that the turn-around time for searches in the Ashfield District Council in Nottinghamshire was a mere 5 days, meanwhile in the London borough of Hackney they were waiting 180 days.

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How to Achieve Financial Freedom Faster

Financial freedom is the long-term goal of most people. By definition, financial freedom refers to reaching a position where your combined investments, savings and on-hand cash are sufficient to fund your lifestyle indefinitely.

The road to financial freedom is peppered with potholes and obstacles; the single most prevalent of all is unnecessary spending.

It is no surprise that some estimates suggest that fewer than 10% of people will truly achieve financial freedom.

Even if it means making relatively major lifestyle changes, the rewards more than outweigh the effort involved. If you have set your sights on financial freedom and would prefer to achieve it sooner rather than later, these are the five things you should be prioritising as of right now:

1) Establish a Budget

The first and most important step is to establish a budget you can subsequently stick to. This means separating your wants from your needs, working out exactly how much you need to spend to cover things like mortgage payments, rent bills, utilities and essential shopping. Eliminate anything that is not strictly necessary and figure out how much you could save by minimising your monthly outgoings.

2) Pay Off Smaller Debts

All debts that involve interest payments are expenses you could do without. Consequently, paying off as many smaller debts as possible as quickly as possible is advisable. Every credit card, overdraft, personal loan and payday loan you repay will have a beneficial impact on your finances. It will also put you in a much stronger position for subsequently paying off the larger debts you have at a later date.

3) Create a Long-Term Plan

Even if it calls for the input of an expert adviser, you need to have a concrete plan in place for years; income protection in particular should be considered to ensure you are covered against all possible eventualities. The further in advance you plan, the more likely you are to achieve financial freedom.

4) Consider Investment Opportunities

This is something that should be done strictly under the advisement of a qualified and experienced professional. Making smart investment decisions can hold the key to transforming the capital you have today into something more substantial. As all investments carry a degree of risk, all potential outcomes must be considered carefully and discussed with an expert, before making any major financial decisions.

5) Save at Every Available Opportunity

One of the simplest and most effective ways of bringing financial freedom forward is to save, save and save. Each and every time there is the opportunity to put something to one side, do it; ideally, placed in some form of high-interest account or savings plan.

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House Prices in May Reach New Record Levels

The month of May has seen yet another hike in the average price of properties, reaching a record £261,743, according to Halifax’s latest house price index figures. This is the strongest level seen in almost 7 years with house price inflation rates rising by 9.5% over the last year.

During May a significant increase on year-on-year house prices was seen in all regions of the UK, with the exception of the North East. Wales once again showed the highest growth with an impressive 11.9% rise in the last year. Not far behind were the Nort West and Humberside, with both areas reporting double figure inflation on property prices. For the North West and Wales these figures indicated the best gains seen since April 2005, whilst for Humberside, the property market has not seen rises like this since June 2006.

While the North of England is thriving, the South is not fairing as well, especially in the case of Greater London, where, although prices are up 3.1% from last year, is still somewhat lagging behind the rest of the country.         This is likely due to the shifting preference of property types due to changing work habits and lifestyles following the pandemic. With more buyers working from home, the demand for city properties has significantly decreased, with preferences steering more towards larger properties with outdoor spaces in suburban and rural areas away from big cities. Brexit and additional stamp duty surcharges for non-UK citizens will have no doubt also had a negative effect on overall property sales in London.

Russell Galley, Managing Director, Halifax, stated:

“House prices reached another record high in May, with the average property adding more than £3,000 (+1.3%) to its value in the last month alone. A year on from the first easing of national lockdown restrictions, and the gradual reopening of the housing market, annual growth surged to 9.5%, meaning the average UK home has increased in value by more than £22,000 over the past 12 months.

“Heading into the traditionally busy summer period, market activity continues to be boosted by the government’s stamp duty holiday, with prospective buyers racing to complete purchases in time to benefit from the maximum tax break ahead of June’s deadline, after which there will be a phased return to full rates. For some homebuyers, lockdown restrictions have also resulted in an unexpected build-up of savings, which can now be deployed to fund bigger deposits for bigger properties, potentially pushing property prices even higher.

“Whilst these effects will be temporary, the current strength in house prices also points to a deeper and long-lasting change as buyer preferences shift in anticipation of new, post-pandemic lifestyles – as greater demand for larger properties with more space might warrant an increased willingness to spend a higher proportion of income on housing.

“These trends, coupled with growing confidence in a more rapid recovery in economic activity if restrictions continue to be eased, are likely to support house prices for some time to come, particularly given the continued shortage of properties for sale.”

Director of Sales at specialist lender Together, Sundeep Patel, explains:

“The surge in demand for property we’re continuing to see showed no indication of slowing last month. House prices reached another record high in May, up by 1.3% (more than £3,000) in value than in April. Annual growth also surged by 9.5%, with the average house price in the UK now at £261,743. However, with the Stamp Duty tax break starting to taper off from the end of this month, we’re likely to see this unprecedented rush for new homes ease off by the time we hit the end of summer. The recently released travel traffic light list for UK holidaymakers may also dampen activity as people prepare to make a break for guaranteed sun and so stick a pin in their property plans back home.

“How the property market will shape up by the end of this year is no way near certain. However, whether house prices have been artificially inflated or not, it is possible the backlog in demand from keen buyers will markedly increase opportunities for specialist lenders, as increased volumes of borrowers turn to finance such as bridging loans to quickly purchase their ideal homes.”

SPI Capital’s CEO of Asset Management, Anne Claire Harper, adds:

“Investors and homeowners alike are wondering whether the housing market boom is about to bust? With 9.5% house price growth in the year to May, despite the huge economic problems caused by the pandemic, it’s a sensible question.

“The truth is, what tends to happen in the housing market is different from what happens with other purchases and investments. In other sectors, when consumers get nervous, they stop spending so much. When investors get nervous, they are scared into selling. Things are different in the housing market because homes are ‘essential’. We all need a place to call home.

“So, unlike crypto ‘investments’ or shares, people tend not to sell unless they really need to. And, with interest rates low and forecast to remain so, it can be cheaper to pay a mortgage on an equivalent property than to pay rent. So a mass sell-off from property owners who have already managed to put down a deposit seems unlikely unless interest rates rise significantly.”

‘According to Halifax, average annual house prices are at an historic high, at £261,743, which will seem unaffordable to many – in particular, younger people. A big cause of growth over the past year has been the desire for more space – and for those not moving, home renovations are increasingly popular. This is symbolic of our rising living standards which is, on the whole, a good thing. As a result, house prices and construction costs rising. This means, in turn, that the cost of renting, buying and improving homes are likely to continue to rise.”

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Mortgages

Major Growth in BTL Landlords Showing Interest in Greener Mortgages

Interest in green mortgages is at an all-time high, according to new figures published by Mortgages for Business. A poll conducted on around 300 UK landlords found that 62% have an active interest in loans that incentivise borrowers to make energy-efficient improvements to their properties.

The figures contrast sharply with those of two decades ago where none of the landlords polled said that they were interested in eco-friendly mortgages for properties they purchased before the year 2000.

“Much of the UK’s housing stock is very energy inefficient, making our homes a major source of greenhouse gas emissions. Improving the energy efficiency of the UK’s stock of housing is a priority in the fight against climate change. A green mortgage means that, once they can confirm they have a revised energy rating for their property, the right lender will recalculate their mortgage rate at a discount,” commented Jeni Browne, director of Mortgages for Business.

“There are various mortgage products out there but the best are applied on completion of an energy efficiency project and applied for the lifetime of a mortgage. Given housing accounts for such a significant chunk of the UK’s carbon emissions, it’s great that landlords are so interested in making greener choices – spurred on, no doubt, by the fact landlords are rushing to upgrade their properties to meet new EPC rating rules by 2028. Whatever the reasons, landlords now appear interested in joining the battle to combat climate change. That hasn’t always been the case,”

“We started trading in 1990 and the findings of our poll match our experience of the market over the last 30 years. Landlords’ attitudes have changed dramatically, particularly in the last decade. Landlords should be interested in these products though – quite apart from the ethical considerations, green mortgages reward landlords with a lower rate when they shrink their carbon footprint.”

An Unusual Generational Disparity

Traditionally, younger generations have been known to demonstrate greater interest in environmental issues and conservation than older demographics. In this instance, however, older landlords are more likely to seek green mortgages than younger BTL investors.

Specifically, Mortgages for Business found that while 66% of landlords over the age of 45 were interested in green mortgages, only 50% of those in the younger age bracket were likely to apply for such loans.

Ms Browne stated that while the numbers are reassuring, major lenders need to do more to ensure greener options are available.

“Hopefully, our research will help drum up more lender supply,” Ms Browne continued.

“The UK’s largest lenders have launched a wave of climate-change products amid criticism over their slow response to global warming,”

“For instance, one of the big lenders did launch a Green Mortgage last year and we’ve seen others follow suit but have only offered borrowers preferential rates when they purchase an energy efficient property – rather than rewarding those improving the ecological footprint of the UK’s housing stock,”

“It’s not enough and that’s why they have failed to impress campaigners. Given Britain has just enjoyed the greenest Easter on record, with almost 80% of the energy used at lunchtime on Easter Sunday coming from zero-carbon sources such as solar and wind, the industry is in danger of falling behind the times unless we do our bit.”

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Mortgages

More First Time Buyers are Turning to Brokers for Support and Representation

The potential value of the services offered by brokers is being acknowledged by first-time buyers on a more widespread basis than ever before. That is according to the latest figures from Aldermore Bank, who indicate that one in every two first-time buyers is now using the services of an independent broker.

Specifically, the data published by Aldermore Bank suggests that 48% of first-time buyers were applying for mortgages with the help of a broker during March this year. One year earlier, just 18% of prospective first-time buyers said they were using the services of brokers.

In addition, a further 19% of those polled stated their intention to work with a broker at some point in the near future.

An impressive 98% of those who used the services of brokers to assist the purchases of their first homes said that the service they received was useful.

Affordability Checks and Objective Recommendations

Motivations for working with brokers were relatively consistent among those who took part in the survey. Aldermore Bank reported that 55% of first-time buyers contacted brokers for help finding affordable mortgages from recommended providers, while at the same time assessing affordability based on the applicant’s financial circumstances.

In addition, 54% stated that the brokers they worked with assisted with the application process and general paperwork, while 37% said they found out important information via their broker they were not previously aware of. 35% also stated that the broker they worked with recommended specific mortgages or other options, helping them make the right decision and subsequently take their first step on to the property ladder.

In total, around one in three first-time buyers using brokers said it was invaluable to have an expert explain the property purchase process in clear and simple terms.

A Lifeline for First-Time Buyers

Commenting on the findings, head of mortgage distribution at Aldermore, Jon Cooper, said that independent brokers have been providing first-time buyers with particularly valuable help and advice in the current economic climate.

“Brokers have been a life raft for first time buyers in a sea of increasing challenges and worsening conditions during the Covid-19 pandemic,” he said.

“Buying a property can be a very daunting experience but brokers have been vital to first time buyers the past twelve months in assisting them to navigate through this period of uncertainty,”

“The much-needed expertise and guidance they have provided really shows how crucial the role of the broker is in today’s housing environment and it’s very encouraging that their services have been found to be universally beneficial.”

Meanwhile, additional data published by Aldermore this month highlighted a significant increase in the number of rejected mortgage applications from first-time buyers over the course of the past 12 months.

In March 2021, more than 80% of first-time buyers said their application had been declined by at least one lender, significantly up from the 53% recorded during the same month last year.

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Mortgages

Is Now the Right Time to Consider Equity Release?

The UK’s real estate market has bounced back from its COVID-19 crash at a pace none could have predicted. Fuelled by the temporary stamp duty holiday and the collective desire of millions to upgrade to more spacious rural properties, average house prices recently hit a record high of £238,831.

As a result, many people are finding themselves living in homes that are worth considerably more than at the time they purchased them. Consequently, equity release is becoming an increasingly attractive option among homeowners within the 55+ age bracket.

According to the latest figures from the Equity Release Council, total equity release activity during Q1 this year was up 7% from the same period in 2020.  Collectively, homeowners released equity totalling £1.4 billion during the first three months of the year. But does this mean that now is the right time to release equity?

The Impact of Rising House Prices

Eligibility for equity release is based on two things:

  1. The market value of your home
  2. How much of your mortgage you have repaid

Consequently, homeowners with properties that have increased significantly in value could find themselves able to borrow more than would have previously been possible. This could therefore open the door to a wide variety of cost-effective borrowing options, which could be used for anything from home improvements to taking the holiday of a lifetime.

Is Now a Good Time to Consider Equity Release?

Understandably, the option of releasing equity at an affordable price is an attractive option for many homeowners who lack extensive reserves of on-hand cash. But does the current economic climate make now the right time to consider equity release?

The answer depends entirely on the financial circumstances and long-term outlook of the applicant in question. The fact that average house prices are skyrocketing has no direct bearing on the affordability or otherwise of products like these for the average homeowner.

If you are in a comfortable financial position and can genuinely afford equity release, then yes, now could be a great time to take action. At the same time, anyone considering equity release also needs to factor in the potential for property values to decrease over the coming years and decades.

Understanding the Options Available

Reaching a decision without the input of an experienced broker is inadvisable, as there may be significantly better deals on the market than those available from the high street banks.

Whether you are ready to go ahead with an equity release application or simply look to discuss your suitability in more detail, we can help. UK Property Finance offer 100% independent and obligation-free advice on all aspects of equity release, along with a full market comparison service to ensure our clients get the best possible deal.

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