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."