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Equity release dabbling opens up compliance risks

Equity release dabbling opens up compliance risks

Equity release ‘dabblers’ unaware that enhanced loan-to-values are offered for those with medical conditions, could face a slap on the wrist from the regulator, Key Partnerships has warned.

Data gathered by the referral service found 1,500 firms completed less than one equity release case a month in 2014.

Will Hale, director at Key Partnerships, said the sheer volume of firms who do little equity release business should prompt concerns about potential regulatory issues.

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This follows data released by Bower Retirement Services which found that 70 per cent of equity release advisers expect the market to continue to grow over the next six months, despite the short-term effect of the new pension freedoms.

The proportion of customers choosing equity release to boost inadequate pensions has more than doubled from 6 per cent in the fourth quarter of 2014 to 14 per cent in the first quarter of 2015.

This supports recently published statistics by the Equity Release Council which showed that the new pension freedoms have increased the appeal of equity release, with total lending in the first quarter of this year growing 3 per cent to set the largest first quarter lending total on record.

Mr Hale said: “Advisers need to be aware of the potential regulatory pitfalls of only occasionally offering equity release as a solution - this could mean they are not whole of market and run the risk of unintentionally not offering clients the best service.

“A great deal has changed in the equity release market in recent years, with new products and rates that may not be revealed using traditional mortgage sourcing systems.

Meanwhile, equity release specialist Stonehaven increased the loan-to-value rates offered across its lump sum, interest select and voluntary select products by between 5 and 10 per cent.

The move follows the latest figures from the Equity Release Council, which found that the average value of drawdown lending per customer in the equity release market was up 4 per cent in the first quarter of 2015, compared to the last quarter of 2014.

emma.hughes@ft.com