tony's blog

Tuesday, November 8, 2011

The Return of Equity Release

Equity Release: universally considered as the bad guy on the block in lending terms. Much maligned by critics, why has it had so much bad press over the years?

Well there are many myths attached to it, probably the most universal being the consumer risks losing his home. (According to research by Safe Home Income Plans (SHIP) some seven out of ten consumers believe that opting for equity release means you have to move out of your home.) However the simple fact is that as long as that property remains the main residence, the customer can remain in it for the duration of his life. 

More concerns follow: you won’t be able to leave an inheritance; your children will be saddled with debt; you won’t be allowed to move home and equity release is ‘unsafe’ and ‘unregulated’ etc. Yet all of these fears are pretty much unfounded if the right product and provider are chosen. Early products didn’t have the safeguards and protections that they do now. This type of lending is seen as specialist and carries risks not found in conventional mortgage lending; hence it has had its own regulatory regime for some years now.

My view is that equity release has to be a force for good if handled with care and compassion. We can’t get away from the fact that the UK population is ageing and going forward there is insufficient pension provision out there. Moreover many borrowers don’t have the capital put aside to pay off the interest only element of their conventional mortgage so there is a genuine need for this product. I can only see that demand for equity release products will grow in the next few years. Its time has finally come in my view. What is important is that the right products are in place to cope with the demand so this much maligned sector gets some positive PR at last.

As Andrea Rozario, director general of SHIP said: ‘The wealth locked up in a property…will continue to be the greatest asset most people have as they approach retirement’. So they should make the most of it.

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