Equity release could be ripe for innovation during 2016 and the sector’s trade body has confirmed it is “open-minded” about allowing providers to launch products that do not meet the standards it has set.
The Equity Release Council, the trade body for the sector, sets product standards which its members must comply with.
Among these is a rule that all products must have a “no negative equity” guarantee meaning that when a property is sold, and agents’ and solicitors’ fees have been paid, even if the amount left is not enough to repay the outstanding loan to the provider, neither the client nor their estate will be liable to pay any more.
Nigel Waterson, chairman of the Equity Release Council, said the trade body had agreed with one of its members that it could launch a product which didn’t meet its standards but said this has been the only instance so far.
He said: “I think there will be more and more pressure from the marketplace to introduce products which don’t fulfil our standards.
“But people need to be clear what they are getting and what they are not getting. If they are giving up a no negative equity guarantee they might live to regret it.
“We are open-minded and I am proud of the fact that as a sector we are very innovative.”
Key Retirement’s business development director’s Will Hale said equity release would need to be altered to make it attractive to younger people in their 50s who might want to access cash tied up in property.
He said: “One of the criticisms levelled against the equity release market is that products have tended to be fairly inflexible.
“We are already seeing more flexibility such as the ability to repay capital on their loans and the ability for people to port their loan to a new property but you are only going to have more flexibility.
“If you look at things like the no negative equity guarantee that exists now, that’s a valuable protection and it adds cost to the loan but if they are perfectly happy to service a loan and are coming in with other assets, it’s a protection they may not want to pay for.
“There is a different profile of consumer coming to the market who is 55 or 60-years-old and that will require more hybrid retirement lending products to be developed and I would expect that to come through this year.”
