Industry must ensure equity release is safe as houses
The government and regulators must work together over the next few months so that equity release is properly supported and overseen by the FCA in the best interests of consumers.
Nigel Waterson, chairman of the Equity Release Council, said that as an increasing number of people were considering if equity release was appropriate for them, the regulator should be involved in making sure the market was properly regulated.
Mr Waterson said: “The months ahead will see important discussions with regulators and government about how to build on this foundation, so that where there is a need, more people can make use of what is often their biggest source of retirement wealth.”
During a Treasury Select Committee meeting on 21 October, acting chief executive Tracey McDermott said the FCA was committed to seeing whether equity release – with its “unfortunate history” of mis-selling in the late 1990s and early part of the 21st century – was indeed appropriate.
Ms McDermott told the TSC: “We need to think about whether the financial services industry is providing the right sort of products at the right stage of life”.
In October 2014, the Financial Ombudsman Service revealed that complaints about mis-sold equity release schemes were rising.
Alice Watson, product and communications manager for provider Retirement Advantage Equity Release, said: “It is encouraging to hear the FCA pledging to look at how it can better support the equity release industry as it grows and is used by more pensioners across the country.”
Stephen Lowe, director of external affairs for Just Retirement, said: “We would like to see that one of the practical outcomes of the Financial Advice Market Review is recognition of the key role housing wealth has to play alongside pensions and insurance in supporting income in retirement and care funding.”
Their comments came as the ERC revealed that equity release lending rose £68.3m in the third quarter of 2015 compared with the previous quarter – the greatest rise since the third quarter of 2004’s £78.4m.
Total third-quarter lending rose 21 per cent year-on-year, compared with 18 per cent annual growth in the second quarter and 3 per cent in the first quarter, to reach £452.6m. This is a new lending record for a second successive quarter, equivalent to £5m of housing wealth being accessed each day.
The 6,049 new plans taken out in the third quarter of 2015 represented a 12 per cent increase on the second quarter, which marked the first time this measure has exceeded 6,000 since the fourth quarter of 2008.
Adviser view
Lorreine Kennedy, IFA and head of care-fee advice at Hertfordshire-based Carematters, said: “We have seen a strong rise in equity release. But if using equity for care, then if I release something like £15,000 per year, local authorities withdraw free care. We need some movement on that as it prevents some people from taking out equity. ”
