Pensions  

Equity release can help interest-only prisoners: KRS

Equity release can play a major role in finding solutions for customers who have interest-only mortgages but who need to repay capital, Key Retirement Solutions said.

Speaking to FTAdviser, Dean Mirfin, group director at Key Retirement Solutions, said that while opportunities are strong in equity release and annuities, the firm still needs to work hard to deliver its strategic ambitions and “cannot take them for granted”.

He said that equity release is growing strongly and the total value of property wealth released in 2013 is likely to have been a record of £1bn-plus with the housing market revival driving confidence.

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Over-65s homeowners own property outright worth more than £792bn now and as the housing market continues to grow strongly that is likely to expand, Mr Mirfin said. He added that the focus within equity release will be increased innovation.

Mr Mirfin said: “The challenge for the equity release market is to adapt to the changes in the property market and to offer solutions for retired homeowners addressing those changes.

“A key challenge is the interest-only issue – equity release can play a major role in finding solutions for customers who need to repay capital.

“Key’s lender ‘More 2 Life’ offers its ‘interest choice plan’ enabling customers to pay interest but more innovation is needed throughout the market.”

In August of this year in a long-awaited response to the growing interest-only mortgages furore, the Financial Conduct Authority warned against ‘shoehorning older borrowers with no repayment plan into potentially unsuitable equity release mortgages.

It said: “We recognise that for a select group of customers, equity release may provide an alternative solution to repaying the existing mortgage when other solutions are available.

“However, this will not be the case for all customers, and will depend on their individual circumstances.”

Elsewhere, Mr Mirfin believes the main focus in the annuity market is to build on the partnerships it has already with Friends Life and Engage Mutual.

He said: “Across the market as a whole the focus has to be on improving use of the open market option.

“The annuity market is going through massive change as use of the open market option expands with regulators and trade bodies focused on ensuring customers do shop around.

“Our whole-of-market annuity service has gone from nothing to a top five annuity service in just over three years but there is more disruption to come in the market with companies needing to focus on customer care and how they can improve services to customers.”