Sixty Plus win at the 2007 Equity Release awards

The equity release sector celebrated another year of growth at Mortgage Solutions' Equity Release Awards last week.

The third annual event, held at the Millennium Hotel in London's Mayfair, featured celebrity guest speaker Steve Rider, who fronts ITV's Formula One coverage, as well as the Rugby World Cup.

We are delighted to have won two awards.

Best Financial Adviser (less than 10 employees)

Best Financial Adviser Newcomer

Thank you very much to those who voted. Your support is much appreciated.

James Prosser, commercial director of events for Incisive Media's mortgage division, said the industry's tremendous support of the event was an indication of the increasing strength of the sector.

He added: "The demand for these products has never been higher, and the long-anticipated regulation of home reversion plans back in April provided a timely boost.

"There is now a queue of lenders waiting in the wings to launch their offerings and innovate further in this market, which can only be a good thing for the sector in 2008 and beyond," he concluded.

Andrea Rozario starts as first director general of SHIP

Andrea Rozario begins her role as Director General of SHIP (Safe Home Income Plans), the UK equity release industry body representing over 90% of the equity release sector, reports Mortgage Solutions.

As director general, Ms Rozario will be responsible for developing strategy and communications activity with the range of SHIP’s stakeholders and increase understanding about equity release among consumers and relevant organisations.

Sixty Plus comment: We wish Andrea well in her new role and look forward to her enhancing the profile and reputation of the Equity Release sector.

Pensioners' lives improved with equity release, says SHIP

Equity release products make a real difference to the lives of pensions, according to the general of industry trade body Safe Home Income Plans, reports Financial Adviser (15/11/07).


Andrea Rozario said: "I made the move to specialising in equity release because I saw the potential in what is a very exciting market. I felt this was something I could really get satisfaction from."

Ms Rozario said equity release was one of the only products that could immediately improve the quality of many pensioners' lives.

She said: "The feedback and thanks I have received from customers has more than made my decision worthwhile. I think anyone who likes dealing with people who are genuinely grateful for advice and help would enjoy the rewards offered by specialising in equity release."

Dean Mirfin, business development director at Lifetime Advisory Services, said: "It is important to seek specialist advice. A direct provider will not take into account all options and won't say a better rate is obtainable from an intermediary."

Mark Roberts, head of financial regulation at ifs School of Finance, said he was delighted that advisers were seeing the benefits of specialising in equity release but he would like to encourage more women to make the move following the revelation that less than a quarter of advisers taking the certificate in regulated equity release are women.

SHIP appoints its first director general

Safe Home Income Plans (SHIP), has appointed Andrea Rozario as its first director general in a full-time capacity, reports Mortgage Solutions (30/10/07).

The appointment represents the beginning of planned expansion of SHIP activity, following the results of a strategic review of the trade body earlier in the year. As Director General of SHIP, Andrea will focus on developing strategy and communications activity with the range of SHIP’s stakeholders in the equity release industry, including IFAs, product providers, consumers, the media, regulators, consumer organisations and government.

Rozario will begin the role of director general on 3 December and will be based in a central London office.

Laurie Edmans, non executive chairman, SHIP, said the appointment represented an advance for SHIP and highlighted its desire to increase its role and the profile of equity release.

Andrea Rozario added: “There are many possibilities that lie ahead and the role of director general shows a serious commitment from SHIP and the industry’s desire to aid future growth.”

Sixty Plus comment: This can only be good news for the equity release sector. Andrea has a good reputation as an equity release specialist and we hope she will be able to raise the profile and reputation of equity release with the media.

Over 60s sitting on equity ‘goldmine’

Homeowners over 60 now have an average of £82,446 tied up in bricks and mortar, according to new data from Norwich Union, reports Mortgage Solutions (26/9/07).

However only one in ten know how much their homes are worth and just 6% would consider selling their property to raise capital. Those aged 60–69 (13%) were more in touch with the value of their properties than older respondents, with just 6% of over 80s aware of the value.

Dominic Fraser-Smith, group product manager at Norwich Union Post Retirement Products, commented: “It is upsetting to see that two-thirds of over-60s are just getting by on £10,000 or less per year while sitting on what is potentially a retirement goldmine that could dramatically improve their quality of life. Equity release offers consumers the opportunity to access the financial value of their property without incurring moving costs or leaving the home they love, so it can be a handy solution to a difficult problem.”

Price Boost For Equity Release

Huge increases in retired homeowners' property values, which have seen prices increase by over £151m a day, could see more people turning towards equity release, Prudential has suggested (reports Mortgage Solutions 17/9/07).

The provider recently launched its Pensioner Property Equity Index, a quarterly audit to monitor the value of retired property owners' homes, with research revealing that in total retired homeowners in England and Wales are worth £714m.

Ali Crossley, business director of retirement income at Prudential, commented: "We are seeing the emergence of a more holistic view of retirement savings. Equity release is definitely a consideration for many and, when homeowners see the value of their homes increasing by such phenomenal amounts, the appeal of securing an income in the form of a property pension is increasingly attractive."

However, Andrew Dixon, marketing and sales manager at home reversions provider Bridgewater, questioned Prudential's thinking, and said: "The vast majority of clients identify the need first, whether it is for emergency funds, or a lifestyle change, and then look for a way to fund it."

Size doesn't matter in Equity Release

The Equity Release market should be judged on the number of plans sold, not the lending figures according to Safe Home Income Plans (SHIP), reports Mortgage Solutions (25/8/07).

Jon King, chief executive of SHIP, said people question why Equity Release lending appears not to have grown, but they were being misled by the fact people were increasingly taking out the money they required rather than what was available.

"Drawdown is becoming a major part of Equity Release, matching people's borrowing with what they need. People are taking what they need now. Often people look at the total lending and asks if it's a good year. But it mirrors the fact that drawdown plan numbers have grown strongly; more people are taking out equity release, but taking less money."

SHIP's quarter year results at the end of June 2007 reported drawdown showed the most pronounced growth out of all Equity Release options, representing 47% of all plans sold.

Sixty Plus comment: This very much reflects our experience. It is still commonplace for clients to seek the maximum amount but further discussion reveals an intention to park funds in the bank pending future plans. Drawdown makes far more sense because it can drastically reduce the impact of rolled-up interest.

Equity Release 'misunderstood'

56 per cent of Brtions do not understand what equity release is, according to Norwich Union, reports Mortgage Introducer (7/7/07).

Research undertaken by the firm, which surveyed over 1,000 adults, revealed that over half of respondents did not know what equity release was. 80 per cent were unsure of the age eligibility for equity release, while 38 per cent were unaware that equity release policies could affect state benefit entitlements.

28 per cent of consumers were unaware that equity release was regulated by the Financial Services Authority, while 36 per cent believed that plans would ensure they were protected from negative equity in the event of a housing market downturn.

Elizabeth Boardall, head of marketing at Norwich Union Post Retirement Products, was surprised by the findings. “It is worrying that so many people are unaware of the basics of equity release when this may be a viable option for many approaching retirement.

Providers and mortgage intermediaries alike have a role to play in ensuring that consumers fully understand the products available and the options open to them.”

Jon King, chief executive of Safe Home Income Plans (SHIP), said: “This news comes as no surprise to me, and is exactly the reason why SHIP is expanding its activities to get the message across that equity release is cheaper and more flexible than it has ever been.”

SHIP announces future plans

Safe Home Income Plans (SHIP), the trade body for equity release providers, has announced the results of a strategic review into its future direction, reports Mortgage Solutions (21/6/07).

SHIP has decided to expands both its resources and activity significantly, and is to appoint a full-time director general, who will focus on developing the trade body’s strategy, liasing with a range of stakeholders in the equity release industry and communicating with the media. Once appointed, the director general will work with two new SHIP boards – a main board of SHIP members who will make decisions regarding the direction of SHIP’s activity, and a new management board which will manage the execution of decisions from the main board. SHIP’s current home reversions and lifetime mortgage boards will be incorporated within the management board. It is hoped the new director general will be operational by January 2008.

Laurie Edmans, non-executive chairman of SHIP, commented: “The decision to appoint a new full-time director general represents a real advance for SHIP. It highlights the united desire of SHIP members to increase activity within the equity release market whilst continuing its positive work to raise standards of advice for customers and IFAs.”

Jon King, chief executive of SHIP, added: “SHIP has come a long way since its early days in 1991 and the member’s decision to appoint a full time director general only serves to prove this. With a dedicated management board and increased resources SHIP will be in the best position possible to push for further advancements in the equity release industry.”

SHIP makes surprise U-turn on lifetime exam requirement

Safe Home Income Plans (SHIP) has been lambasted by intermediaries for its U-turn on requirements for advisers to obtain lifetime mortgage qualifications by 1 August, report Mortgage Solutions (11/6/07).

Since June 2006, SHIP has stated that its members would reject from August business submitted by advisers who had not achieved either the CF7 qualification from the Chartered Institute of Insurance (CII) or the Certificate in Lifetime Mortgages from the Ifs School of Finance.

But Jon King, chief executive of SHIP, said last week that providers would accept cases from unqualified advisers if they were being supervised by a broker who had taken the exams. Defending SHIP's position, King said: "Somebody can sign off another broker's advice, and this has always been the case."

However, Stuart Wilson, senior partner at Equity Advice, insisted SHIP had deviated from its original stance. He commented: "Jon King needs to show true leadership and stick to what he said in the beginning. If they are not going to be strong on their position, they might as well not have bothered."

Suggesting the apparent change of heart could be motivated by concerns among providers that they could lose business if they had to reject cases from unqualified advisers, Wilson said the situation gave further credence to calls for an advisers' trade body for equity release. He added: "SHIP has tried to say previously that it would embrace the intermediary channel, but this is a clear representation of why it cannot have a foot in both camps."

Peter Wright, an adviser at CBK IFA, said it had not been publicised that advisers could work under supervision and commented: "It makes a mockery of the exam – one person in a firm could take it and then supervise up to ten people."

The Ifs School of finance and the CII both stated they were unaware of SHIP's new position.

Sixty Plus comment: SHIP appeared to be taking a firm stance ahead of the FSA's position as regulator. This backward step is surprising and disappointing. This looks to me like product providers worrying about cutting off distribution.

Equity Release rate 'lower than 'SVRs'

The average rate for equity release is considerably lower than the average standard variable rate for mainstream mortgages, equity release trade body Ship has claimed, reports Financial Adviser (24/5/07).

It calculates that the average rate of interest for the top 10 equity release providers stands at 6.39 per cent, while it puts the average standard variable rate for the top 10 mainstream lenders at 7.32 per cent.

Ship reported this 0.93 of a percentage point difference between rates had grown since it last made such an analysis in September 2006, which showed a difference of just 0.35 of a percentage point.

Jon King, chief executive of Ship, said: "This further research by Ship continues to counter critics' claims that equity release lending is prohibitively expensive and an option of last resort. Since April this year, the whole of the equity release market has become fully regulated by the City watchdog.

"Ship has also continued to campaign to raise the standards of advice available to consumers through calling for compulsory examinations for IFAs offering Ship members' products and issuing advice checklists adhering to a stringent code of conduct. With these rising standards and the low interest rates highlighted above, it has literally never been safer or cheaper to take out equity release."

SHIP asked to justify 'unexplainable' equity release redemption penalties

Safe Home Income Plans (SHIP), the trade association for equity release providers, has been urged to tackle 'unexplainable' early redemption penalties among providers, as an independent report into equity release has levelled further criticism at the sector, reports Mortgage Solutions (30/4/07).

The Defaqto study, Equity Release in the UK 2007, criticised the fact that several equity release providers do not tell customers exactly what their early redemption penalty will be, as they claim that it is impossible to calculate the figure in advance as factors including interest rates and money market swap rates are subject to change.

The report concluded that: "Clarity of terms should be a desirable feature and Defaqto expects this issue to be addressed by the providers concerned as they are attracting increasing levels of criticism."

Commenting, Jon King, chief executive of SHIP, said that despite the criticisms, it had no plans to address the subject. "SHIP never gets involved in this area, because this is a pricing matter. It is an advice issue, a question of matching the right product to the right client."

Robin Gordon-Walker, spokesman for the FSA, said Mortgage Code of Business (MCOB) rules made it clear that providers must state early redemption penalties as a cash value. He warned: "Lenders need to have regard to that rule – when there is a specific rule, it should be honoured."

It has been suggested that the problem could be addressed if the industry as a whole made a commitment to change their policy on redemption penalties.

SHIP reveals market growth

Safe Home Income Plans (SHIP) recorded a rise in new business of 7 per cent for the first quarter of 2007, reports Mortgage Solutions (30/4/07).

The twenty one members of UK equity release industry body, SHIP (Safe Home Income Plans), that represents over 90% of the Equity Release sector, reported record first quarter figures to 31 March 2007.

Overall Business Figures

The total number of new equity release plans sold in Q1 2007 increased almost 7%, year on year, from Q1 2006 (6,363 - 2006 to 6,785 - 2007) and highlights the fourth year of consistent growth. The total value of new business written reached £293.9 million, the highest Q1 figure to date, and contributed to an annual rolling year total figure of £1,169.2 million at the end of Q1 2007.

Home Reversions

Home reversions continued to grow strongly with the number of plans sold increasing almost 14% from Q1 2006 to Q1 2007 (363 – 2006 to 413 – 2007) and accounted for £22.5 million worth of new business.

Drawdown Mortgages

Whilst lifetime mortgages accounted for 94% of new business for SHIP members in Q1 2007, it was drawdown mortgage options that persisted in popularity. These plans accounted for 40% of all new equity release business in Q1 2007 compared to almost 20% in Q1 2006 and 7% in Q4 2005, when drawdown schemes were first introduced.

During Q1 2007 £92.9 million was taken from £198.5 million committed new business compared to £45.1 million taken from £87.0 million of committed new business in Q1 2006.

Increased interest amongst intermediaries

The number of equity release plans sold via intermediaries in Q1 2007 increased almost 17%, year on year, from Q1 2006 (3,368 – 2006 to 3,925 – 2007) and accounted for 58% of all new business. Such growth highlights a growing understanding of the equity release market amongst IFAs and the business potential it represents.

Jon King, chief executive of SHIP commented: “The number of new equity release plans sold in Q1 2007 represents a record first quarter for SHIP members when figures are compared year on year, with drawdown products clearly proving popular amongst consumers.

“The amount of business arranged through intermediaries, however, is also encouraging. With SHIP’s compulsory deadline of 1st August to hold a lifetime mortgage examination it is hoped that this growing proportion of business from IFAs will be matched with relevant and necessary advice for the consumer.”

Equity release entering ‘crucial stage’

Equity release is a high profile and evolving market which is entering a crucial stage in its development, according to the latest Defaqto report (reports Financial Adviser, 23/4/07).

But the report warned that equity release is still tarnished with the bad publicity that came from products available in the late 1980s.

Defaqto has identified key criticisms of the market and the way forward for advisers and providers.

David Black, head of the banking research team at Defaqto, said the combination of under-funded pensions, low annuity rates, demographics and overhanging pensioner debt plus the levels of equity built up in housing stock should mean more pensioners take out the product.

However, the report states there ‘remains the possibility in future years that equity release will become a compulsion rather than an option as the Government tussles with the income requirements of the projected rapid expansion in the elderly population.’

Mr Black added: “The reality is that such a politically unpopular approach would not be too far removed from the current deferred payment scheme operated by local authorities to help homeowners fund their long term care costs.”

SHIP mortgage exam success

Safe Home Income Plans (SHIP), the equity release industry body, said that from 1 August, SHIP members will no longer accept any business from advisers who have not passed the appropriate lifetime mortgage exams, reports Financial Adviser (3/4/07).

SHIP research shows that 723 people have taken and passed lifetime mortgages examinations since February 2007, taking the total number of those who have passed to 6742.

With more than 700 more applicants taking these exams over the next two months more IFAs will be qualified by the summer deadline.

Jon King, chief executive of SHIP, said: “It is very encouraging to see the increasing number of individuals who have taken the time to study for and pass the lifetime mortgage examination.

“SHIP’s decision to make home reversion examinations compulsory for IFAs wishing to work with its members from April 6 2008 was taken as a further attempt to continue to improve standards in equity release advice available to consumers.

“With many exam options available we urge more advisers to register and take advantage of the opportunity presented by equity release.”

Home reversion 'to grow fourfold'

Home & Capital has predicted the home reversion market will grow to 20 per cent of the equity release market on the back of regulation, (reports Mortgage Solutions 2/4/07).

Home reversion plans currently equate to 5% of the equity release market. As home reversion plans become a mainstream retirement planning product, volumes could grow tenfold in less than a decade. It will also help the whole market to grow and start to deliver on independent estimates of a doubling of the equity release market by 2010.

The new regulatory regime extending to home reversion plans, which starts on 6 April, is being introduced following extensive lobbying by the industry, and will help millions of older Britons to provide for their retirement years.

Nigel Hare-Scott, sales director of Home & Capital, explained: “This country is facing a pensions debacle. Final salary pension schemes continue to close, the performance of money purchase schemes is insufficient, and the Government cannot keep supporting an ageing population going forward. However, homeowners do have considerable property wealth and can use this to supplement their retirement income.”

“Often, the best decision for people is to trade down - sell a property which is too big once the children have left, buy a smaller one and release a cash sum. In other circumstances, the individuals may for personal reasons wish to stay in the family home and equity release is the most suitable choice.”

Equity release products have existed since the late 1960s and John Inskip, founder of Home & Capital, invented the first home reversion plan in 1978 – a means by which a homeowner could sell the home for a cash lump sum and receive a rent-free lifetime lease. Home reversion plans were excluded from regulation as there was no evidence of ‘consumer detriment’. This meant, however, that advisers tended not to recommend (unregulated) home reversion plans, even in instances when it was more appropriate than a (regulated) lifetime mortgage.

“We lobbied for regulation of home reversion plans because it created a level playing field in the equity release market,” continues Hare-Scott. “Not because there had been any instances of malpractice or consumer detriment that needed to be eradicated. Complaints are consistently very low.

“This level playing field will help ensure that people are genuinely given independent advice with all the options fully explained – downsizing, lifetime mortgage, home reversion plan, or do nothing. Advisers will be under a clear obligation to cover all the options and guide customers fairly and objectively, and to that end training is being strengthened.”

Home reversion plans may have been overlooked in favour of lifetime mortgages, but have features which give them greater appeal to some customers:

• Certainty and simplicity. Once the percentage of the property being sold and the amount of the lump sum is fixed, all the financial arrangements are fixed

• It is not a loan and no interest is calculated or payable. Some elderly people have an aversion to debt and will not therefore take out a lifetime mortgage, even with a no negative equity guarantee

• A larger amount can be raised compared with a lifetime mortgage

• A plan holder can sell an initial percentage of the property, and then progressively raise additional sums until 100% is sold

• There is flexibility to move house

Hare-Scott concluded: “We believe that the implementation of regulation will act as a catalyst for the growth of home reversions, which could triple over the next couple of years, and increase tenfold in less than a decade. Home & Capital, which has an FSA-authorised subsidiary to advise on a full range of equity release products, is committed to continuing support of the nation’s pensioners in making the right choices about their future financial planning.

“Good Friday, on which regulation begins, is a good day for our industry.”

CII to raise equity release standards

A certificate in equity release from the Chartered Insurance Institute has been given the go-ahead from the Qualifications and Curriculum Authority, reports Financial Adviser (15/3/07).

The certificate is designed to help advisers and brokers meet the regulatory requirements for lifetime mortgages and home reversions.

New rules from the FSA, which come into force on April 6, require anyone advising customers or overseeing non-advised sales of home reversions to pass an appropriate exam.

The certificate is made up of four units; the CF1 for UK financial services, regulation and ethics, the CF6 for mortgage advice, the CF7 for lifetime mortgage activities and the HR1 for home reversion plans.

Bob Bullivant, deputy director of the CII, said: "The FSA stipulates that existing advisers have two years from April 6 in which to pass the home reversion top-up. We have moved extremely quickly to develop a solution to enable advisers to meet the FSA requirements well within that period. Consumers deserve the best possible advice and I would encourage all advisers involved in equity release to get their knowledge up to the required levels as a matter of urgency."

In January, the CII fast-tracked the development of a home reversion plan top-up for advisers who held the CF7 exam, but responded to calls from the Financial Services Skills Council to create a complete solution.

The certificate has been added to the FSSC's appropriate examinations list.

Advisers who complete the certificate and are members of the CII will be able to use the designation Certs CII (MP & ER) to demonstrate their competence.

Brokers demand clarity on rates

Brokers have called for lenders to be more up-front about interest rates offered on lifetime mortgage products, after both Norwich Union and Prudential were named as charging higher rates through direct channels compared to sales through intermediaries, reports Mortgage Solutions (12/3/07).

Norwich Union's annual rate on lifetime products is 6.65% through direct selling, compared to 6.3% through intermediaries. Its drawdown product is 6.8% direct, versus 6.35% through an adviser. Elsewhere, Prudential has an annual equivalent rate of 6.69% direct, ­compared to 6.37% intermediated.

The issue was raised at the London leg of the Equity Release Roadshow. Dean Mirfin, business development director at Lifetime Advisory Services, said many brokers and clients were not aware of the differences. He commented: "The lender's argument is that it has a sales force to run, but over 50% of clients went direct last year, and if they knew about this, they would go elsewhere."

Both lenders defended their interest rate policies, and said they would ensure borrowers had reviewed all the available options.

Prudential said its higher rate for direct sales was implemented to cover costs of administration and fact find, which must be undertaken to ensure the client is getting best advice. Norwich Union said the higher rate covered advice and marketing costs, and pointed out that a direct sale would often entail five or six home visits.

However, neither company said it was their policy to tell customers that the interest rate charged would be lower if they went through the intermediary channel.

Sixty Plus comment: As it was I who raised this issue at the Roadshow, I strongly feel is yet another reason why customers should seek independent advice. The extra interest at 0.35% on £50,000 over 20 years would amount to around £5,500. Compared with our standard fee of £595, it is clear which route will save the client money. Are these providers ‘treating customers fairly’?

Sparks fly as industry squares up to equity release critics

In a landmark meeting, Safe Home Income Plans and Which? came face to face for the first time, to battle out their polarised views of the equity release market, reports Mortgage Solutions (19/2/2007).

In the heated debate, hosted by Mortgage Solutions, the two groups clashed on the issue of standards of advice, despite both being united in a call for more Government involvement in the sector.

Teresa Fritz, principal researcher at Which?, said equity release represented a "last resort", and accused marketeers of promoting the sector as a "luxury product". She explained: "The products themselves are complicated, inflexible, and can be very expensive. The general risk element of equity release is not widely understood."

However, Jon King, chair­­man of SHIP, hit back, claiming safeguards in the sector were higher than in any other, adding that his members insist on advised sales, with each client required to have access to a separate lawyer as well as an adviser. He pointed out that, from 1 August this year, the body will not accept business from intermediaries who have not passed a specialist examination in lifetime mortgages.

Independent consultant, Mick McAteer, added to the debate, asserting that the standards and quality of advice on equity release were generally poor, and there had been a "history and legacy of market failure." He continued: "What saddens me is that there is a role for equity release, but the market is not delivering".

The IFA view was represented by Michael Philps, business manager at Hinton & Wild, who said most clients took a number of months, if not years, to undertake their research, before pursuing the equity release option.

The debate also highlighted the breadth of reasons why clients opt for equity release, from those surviving on a state pension through to those wanting to release capital for "luxury" pur­­chases, such as home imp­­rovements or holidays.

Fritz accused lenders of offering a "small range of products for a very wide range of consumers." She added that the two groups should be offered different products, and suggested the industry favours the more "financially sophisticated and more financially aware" client.

However, all agreed that further discussions were needed to take the sector forward. King concluded: "We feel as an industry that we want to take the next step to educate people more about the plans – where they are competitive – to empower the consumer."

FSA warns over lifetime mortgage advice

The Financial Services Authority has written to firms urging them to ensure their lifetime mortgage advice meets required standards ahead of another market review in late 2007, reports IFAonline.

The letter follows mystery shopping and thematic reviews in 2005 and 2006, which found cases of “unacceptable” advice standards, particularly in firms which transacted low volumes of lifetime mortgage business.

The FSA says lifetime mortgages must be fairly sold to customers who have a clear appreciation of the risks and benefits associated with the product.

It states: “We expect this letter and actions taken by senior management will lead to an improvement in the quality of advice provided. We will review the situation at the end of 2007 and consider whether any further regulatory action is appropriate.”

Key issues which firms may wish to consider include:

• Are advisers putting clients in the position of fully appreciating all the implications of entering into a lifetime mortgage?
• The impact a lifetime mortgage may have on a client’s entitlement to means-tested benefits;
• Where the client is releasing equity for home improvements, has consideration been given to the availability of local authority or other grants/loans?
• What impact will the lifetime mortgage have on the client’s tax position?
• Is the size of any proposed ‘rainy day’ fund reasonable for the client’s circumstances and does the client appreciate the financial implications and risks of borrowing money to invest and/or place on deposit?

The FSA adds: “There is no place in this market for firms that do not develop the necessary skills and do not implement appropriate systems to ensure that they give suitable advice. We expect firms to commit to delivering quality advice or refer the business to firms that have done so.”

Sixty Plus comment: This highlights the need for IFAs to focus on Equity Release properly if they are to advise in this market at all. With Home Reversion Plans become regulated from April, there will be increased scrutiny. IFAs wishing outsource their Equity Release enquiries can contact Sixty Plus at http://www.sixtyplusonline.co.uk/equity-release-advisers-1.htm

At Sixty Plus we have dedicated systems for fact finding, research and report writing to ensure our advice is robust.

SHIP report further equity release success

Reports out today show that there has been a healthy increase in the number of new equity release plans sold over the past year, coupled with a steady growth in drawdown business, reports Mortgage Introducer (27/1/07).

The annual research conducted by Safe Home Income Plans (SHIP) – a body that represents over 90 per cent of the equity release sector – shows that the total value of new business over the last quarter was £317.4 million, taking 2006’s total to £1,154.3 million.

Increases were also witnessed by both home reversion plans and lifetime mortgages in the final quarter of 2006, with the total number of new plans sold increasing by 19 per cent on the last quarter of 2005.

In addition to these promising figures, total home reversions business saw another impressive increase year on year, accounting for £73.5 million worth of new business in 2006 – up almost 35 per cent on 2005. However, lifetime mortgage business slowed over the last twelve months with only a 3 per cent rise on levels in 2005.

Drawdown mortgages were a large part of 2006’s success story and saw steady growth across the months. The final quarter of the year saw £89.9 million taken from a total of £202.9 million committed new business, which is a dramatic six and a half times increase in year on year committed new business.

SHIP’s chief executive, Jon King, commented: “It is clear that equity release is beginning to claim a significant place in the mortgage industry and its benefits are becoming more apparent to those at which it is targeted – the number of customers keen to use flexible drawdown mortgages is also highly encouraging.”

“If anything is to be learnt from the SHIP members’ survey, it is that the industry as a whole must work together to ensure good advice is readily available to these consumers, and that IFAs wishing to enter the market are equipped with the full range of knowledge and skill required.”

Equity release is in demand against a lack of advisers

There is still a shortage of access to high quality financial advice on the equity release market despite increased consumer demand, suggests the organisation backing growth of the sector, reports IFAonline (22/1/07).

Evidence presented by Safe Homes Income Plans (Ship) – the organisation representing over 90% of the equity release market – indicates new equity release business figures for 2006 are expected to see the sector top £1.2bn in sales, rising again to around £1.7bn in 2007.

That said, at the same time as the benefits of lifetime mortgages and home reversion schemes are said to becoming more apparent to the consumer there are still concerns over access to high quality advice in this sector.

Ship’s member survey is also predicting three of the high street’s biggest names will enter the equity release market this year – Nationwide, Halifax and Barclays.

However, all three firms say there are no definite plans to enter the market at the moment, albeit Nationwide is currently in a merger with Portman Building Society, a firm which already offers access to equity release products so officials say it is an area they are considering.

A key driver of recent consumer interest, suggests Ship, is the development of flexible drawdown products which allow the borrower to do a deal with the lender but borrow only what they require at that moment and keep the rest within the property until such time as they need a further cash advance.

At the same time, many borrowers are drawing funds mainly to improve quality of life, such as buy a new car or make home improvements, rather than seeking to live on the income, says Ship.

But given the complexities with trying to understand the impact of using equity release on the borrower’s estate as well as the implications on benefits such as pensions credit, there is a desperate shortage of IFAs who can tackle the issues surrounding drawing funds and improve consumer understanding of equity release and home reversion plans, says Jon King, chief executive of Ship.

“The demand from the consumer for these products is clear, now it is up to the industry to ensure that they have access to appropriate, expert advice as well as great value products,” he says.

Sixty Plus comment: Ship's comments echo our own experience of demand for equity release mostly driven by the desire to improve quality of life.

IFAs not wishing to advise on equity release themselves can introduce clients to Sixty Plus. See http://www.sixtyplusonline.co.uk/equity-release-advisers-1.htm for more information.

Lifetime mortgages guidance published

The Financial Services Authority (FSA) has published a practice guide on lifetime mortgages in response to its findings on good and bad practice guides in the market, reports Mortgage Introducer (20/1/07).

The guide is designed to help firms focus on what they can do to improve their standards where necessary on lifetime mortgages. Recommendations include creating a specialist lifetime mortgage training programme; ensuring advisers are mindful of the impact releasing equity can have on a client’s entitlement to benefits and grants as well as on future options.

The regulator has also urged those firms not up to speed with practices to review its systems and controls, in particular for providing Initial Disclosure Documents or when advising on subsequent investment or rainy day funds. Calls were also made for advisers to ensure they are aware of all new products.

Jayne Almond, managing director at Stonehaven, said: “The FSA’s factsheet builds on its report into the lifetime mortgages market last year and highlights concerns over those who merely dabble in the sector. While those clients at the upper end of the scale who use equity release for Inheritance Tax purposes may be less of a concern, complications arise at the lower end where State benefit entitlements come into play. This is where specialism is a priority and must be addressed.”

Rob Griffiths, associate director at AMI, confirmed that a standing committee had been set up to highlight any concerns in the equity relelase market. He said: “The equity release standing committee meets up every two months. A trade body focusing on equity release was discussed, but dismissed and this working group enables us to talk about the issues with no deadline, unlike a working group.”

“The priorities going forward include making information clearer, and the standing committee invited representatives along from Age Concern to its meeting to discuss any changes.”

Sixty Plus comment: IFAs not directly involved in equity release and wishing to refer enquiries should visit http://www.sixtyplusonline.co.uk/equity-release-advisers-1.htm for more information.

Lack of high street lenders holding Equity Release back

The growth of the equity release market is being hampered by the lack of a big high street name, reports Mortgage Introducer (20/1/07).

Dean Mirfin, business development manager at Key Retirement Solutions, said the lack of an instantly recognisable name selling equity release to consumers was hokding the industry back.

Mirfin said: “A lot of advisers pulled out of the market following regulation and mystery shopping, so access to advice is limited. The kcik start for real growth would be a high street presence. If consumers see it on the high street as part of their day to day living, they will be more inclined to enquire about it. Anything that promotes the market in the right way is a good thing.”

John King, chairman of Safe Home Income Plans (SHIP) said the entrance of a big name was a matter of time as the baby boomer generation looked to equity release to fund their retirement.

Equity Release remortgage market set for growth

The equity release remortgage market is set to grow in 2007, reports Mortgage Introducer (20/1/07).

With the evolution of the market through greater competition and with many early lifetime mortgages coming to the end of the lock-in period, it has been suggested that in might be in the best interests of the client to remortgage.

Sixty Plus comment: We would urge IFAs to check for any clients with existing lifetime mortgages on high fixed rates as there is every chance they can save money. There are initial costs but these are outweighed by long term savings potentially running into thousands of pounds. IFAs can refer such clients to us by visiting http://www.sixtyplusonline.co.uk/equity-release-advisers-1.htm