Jeff Prestridge  

In praise of equity release

Jeff Prestridge

Jeff Prestridge

Lenders are also more accommodating over health issues that can result in more equity being released.

"Now is an exciting time for the later life market," said Dave Harris, chief executive of lender more2life, in response to an healthy uptake of new plans industrywide in the first half of the year – 28 per cent up on the same period last year.

"We are delighted to see that product innovation has been a key factor in the industry’s impressive growth. Equity release is in a prime position to help homeowners who require access to extra cash, whether they need it to repay borrowing such as interest-only mortgages, improve their standard of living in retirement, or help their families."

In the wake of Mr Harris’s words, Saga launched an innovative equity release product for the over 60s, enabling borrowers to make regular withdrawals from as little as £200 – but only after releasing an initial lump sum.

"We are delighted to be challenging the market," said Saga. "Our customers have consistently told us they want a solution that enables them to stay in the home they love, but to use it as a way of generating additional monthly money."

Dark clouds

So all hunky dory in the equity release sector? Not quite. For all its innovation and focus on providing consumers with greater flexibility, the sector has a dark cloud overhanging it.

It has been formed by concerns from the regulator, the Prudential Regulation Authority, that equity release players are not putting aside sufficient capital against lending – in case house prices fall and they are required to honour what could be expensive no-negative equity guarantees.

It wants to impose tighter capital rules, kicking in at the end of the year. Already, provider Just has decided not to pay shareholders a dividend just in case the regulator carries through on its threat.

I trust common sense prevails because this ageing property-rich country of ours needs a healthy, competitive and consumer-friendly equity release sector, working in tandem with a segment of the financial adviser market committed to delivering expert advice.

We need an industry looking constantly to innovate, not one having to go into shrink mode because of over-zealous, over-cautious regulatory intervention.

For once, I think my mum would agree with me.

Jeff Prestridge is personal finance editor of The Mail on Sunday