Equity Release  

Scale of equity release mis-advice scandal revealed

Scale of equity release mis-advice scandal revealed

More 2 life has uncovered evidence showing advisers dabbling in equity release may be recommending the wrong deals to clients.

Stuart Wilson, marketing director at more 2 life, said a large number of new advisers are crossing over to later-life lending from the residential sector.

He said these advisers, who have not specialised in equity release, may be unaware of a range of product innovations that have been made during the past few years and as a result they are failing to recommend the best deal available.

Article continues after advert

The provider has found three out of four over-65 homeowners could potentially qualify for an enhanced loan-to-value based on assessment of their medical condition, yet only 15 to 20 per cent of customers actually received an enhanced plan according to a more 2 life estimate based on Age UK Later Life in the UK, the Department of Health National Diet and Nutrition Survey and ONS population data.

One of the main reasons for this was a survey of 100 advisers at the end of 2015 by the provider found that 22 admitted they did not routinely ask health questions when discussing equity release with clients.

Mr Wilson said he was concerned that other features, such as downsizing protection and inheritance protection, were also being overlooked.

Inheritance protection is a feature designed to ensure part of a property’s value is ringfenced so they can pass it on to the next generation – a key concern for many equity release borrowers.

Downsizing protection is designed to ensure clients do not incur any early repayment charges if they repay the loan as a result of selling their home and moving to a different property.

The warning about equity release mis-advice comes amid record growth in the equity release sector, as more and more older people look to access the wealth locked up in their homes. 

Lending surged to a quarterly record of more than £800m in the third quarter of 2017 and could break the £3bn barrier by the end of the year, according to the Equity Release Council (ERC).

The rise in popularity of equity release has led to a tripling of the product options over the past three years, with 78 now available - many of which contain new features designed to protect the consumer.

Mr Wilson said people who did not receive advice on these products could take their complaints to the Financial Ombudsman Service (Fos).

He said: “At the moment, the ombudsman is not finding in favour [of the complainant]. The point is these are complaints about loans five to 10 years ago, when downsizing protection did not exist.

“I think it is important that advisers recognise these are features that exist today, and if you don’t talk about them and have a record you have discussed these concerns, there could be a potential issue further down the track.”

If complaints against advisers are upheld by Fos, they may need to claim against their PI, pushing up the cost of premiums.