Falling house prices do not signal end for equity release

Ship, the UK's professional body for equity release product providers, said equity release should not be discarded as a viable option.

Instead, the professional body is urging advisers and consumers to make sure that they only consider providers that offer crucial guarantees and protection from falling property prices.

Ship says all of its members must offer these guarantees, including a 'no negative equity' guarantee, which means that borrowers will never owe more than what their house is worth, whatever happens in the property markets.

Other guarantees include security of tenure, which means you have the right to stay in your property until you either die or move into long-term care.

Ship also points out that equity release is a long term product proposition and, as such, shorter term house price volatility is much less relevant.

The move to reassure the market follows the 1.3 per cent drop in house prices in April, tracked by the Halifax House Price Index. (See house prices article.)

Andrea Rozario, director general of Ship, said the current situation in the property market does not mean the door is closing on equity release.

"Declining levels of pension investment - by individuals and employers - and the extent to which Britons have in preference invested heavily in property for many years now, mean that equity release will become increasingly important, even if property values do come down from their recent highs for a while," he said.

"The truth is, equity release has a vital role to play in many people's long term financial planning, regardless of whether property prices do fall for a period of time now."