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.