Regulation is largely agreed to have brought “credibility, security and peace of mind” to the equity release market.
It has allowed industry to develop new products, all based around the ‘no negative equity guarantee’ - one of the main manifestations of regulation, according to Andy Wilson, director of Andy Wilson Financial Services and a specialist equity release adviser.
He says today’s equity release market is almost unrecognisable when compared to its ‘fledgling’ days in the 1980s.
Mr Wilson explains equity release is now a mainstream product largely because of regulation: “Potential applicants who may remember the difficulties in the market in the 80’s will be reassured at how developed the products have become.
“Regulation has been a positive move, and seeks to ensure clients are properly and thoroughly advised, guided and supported.
“Regulation means transparency is at the heart of all equity release advice, ensuring clients understand what they are taking up, how it will help them and what they can expect for their future.”
When they were first became popular in the 1980s equity release products, or home income plans and they were then known, were not regulated.
The adoption of self regulation known as SHIP, or safe home income plans, standards in the 1990s and subsequent changes in regulations and standards under the guidance of the Financial Conduct Authority (FCA) and The Equity Release Council (ERC) have made major differences to equity release, according to Aviva.
Roger Marsden, managing director of Aviva equity release, says one of the standout consequences of regulation is that equity release is always fully advised and, “combined with ER Council standards, regulation gives peace of mind".
Andrea Rozario, chief corporate officer at equity release specialist Bower Retirement agrees: “The impact of the code of conduct devised by SHIP cleaned up the market ensuring there are safeguards built into the products, and now the advice process, all of which has helped build consumer confidence.”
The introduction of regulation for lifetime mortgages in 2004 and later home reversions in 2007 further improved confidence, Ms Rozario adds.
Aviva cites regulation as helping drive product innovation which has resulted in the development of important features intended at providing essential safeguards for customers.
Examples of the features driven by regulation:
- No negative equity guarantees.
- Optional inheritance protection guarantees.
- Fixed interest rates.
- Voluntary partial repayment options.
- No mandatory repayments during the loan term.
Further regulation, has for the meantime, been ruled out, although the FCA has proposed the creation of a standalone qualification for advisers wanting to sell equity release products.
As things currently stand, equity release qualifications currently link to mortgages, which means they sometimes don't get the same focus, explains Joanna Fowler, head of product at Saga Money.
Largely light-touch regulation has meant the industry has been able to develop products, she says, which allow people to maximise the amount of equity they can release from their home.