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2010-07-13T16:59:00.002+01:00

Partnership to return to equity release market

2010-06-17T16:14:00.002+01:00

Annuity provider Partnership is set to return to the equity release market this year.

The company is expected to focus on clients with lifestyle impairments, mirroring their approach to enhanced annuities.

The news follows the return of More2Life to the market with a new lifetime mortgage.

With a number of providers having pulled out of the market last year, it is greatly encouraging to see some returning.

More 2 Life returns to equity release

2010-06-14T11:48:00.002+01:00

Some welcome good news for the equity release market; More 2 Life has relaunched a lifetime mortgage after a 2 year absence.

Recent times have seen a succession of equity release providers withdraw from the market place so it can only be good news to see this change.

This follows Bridgewater Equity Release raising their maximum release for their home reversion plan from £100,000 to £250,000.

Equity Release Market Remains Robust

2010-04-28T09:59:00.002+01:00

Value of equity release advances in Q1 2010 at £213.4m
Drawdown mortgages continue to be most popular product (£116.4m)
Home Reversion plans jump 10% to £4.4m

SHIP, the equity release provider trade body, today announced equity release market figures for the first quarter of 2010. Initial data for the start of the year taken from all of the members indicates that while the market is suffering some effects from the loss of providers, demand is strong and activity remains buoyant.

Home reversion advances rose by 10% on Q4 2009 to £4.4m. Drawdown mortgages remain the most popular form of equity release, claiming over half of the market share (55%) with £116.4m worth of advances. Lump sum mortgage sales were £92.6m in the quarter. The distribution of equity release continued to be dominated by intermediaries, who accounted for 79% of all sales.

Overall the value of the equity release market has fallen by 13% from £244.7m in Q1 2009 to £213.4m in Q1 2010. The total number of customers YOY has fallen by just 7%. The percentage of sales through intermediaries has remained stable at the 79% mark.

Prudential withdraw from equity release, but all is not lost

2009-11-24T15:39:00.000Z

There was disappointing news this week when Prudential announced their withdrawal from the equity release market from early 2010.

Their stated reason for ending their four year stint as a lifetime mortgage lender is that “a significant cash expense is incurred up front in acquiring new business and the payback period on capital employed is long. We have concluded that this is not sustainable and that we can deploy cash and capital more effectively across other parts of our business”.

Their market share was 12% in 2009 of an estimated £1bn market so another interpretation could be that £120m of lending isn’t worth the effort and, as a multi-national colossus, they can make more money elsewhere. Those who think the only winners in equity release are the lenders may need to think again.

It is worth bearing in mind that Prudential have form for this behaviour. They once pulled out of the protection market leaving clients and advisers high and dry. At least on this occasion they have given some notice and will continue to service their existing 14,000 customers.

Prudential is by far the biggest name on a list of lenders who have pulled out of equity release in recent times. With the exception of Northern Rock (who had a notional presence since their fall from grace in 2007) and National Counties Building Society, most of those were relatively new to the sector.

So the credit crunch has crunched hard on the equity release sector this year but it is not all doom and gloom.

Vanessa Owen, head of equity release at LV=, says: “We’re a little surprised at the Prudential’s move and believe it could turn out to be a missed opportunity for them. We see this market as a growth area and LV= is still committed to offering equity release.”

Just Retirement have stated that Prudential will have no bearing on its position or strategy within equity release and that the company “remains fully committed to this market for both its profitability and long term growth characteristics.”

Hodge Lifetime and Stonehaven have made similar statements.

Those that remain in the equity release market stand to make the most of others’ absence.

By David Wright
Managing Director
Sixty Plus - The Equity Release Specialist

Equity Release borrowers get benefits boost

2009-11-12T17:30:00.001Z

The Government has made a number of changes to the benefit rules that may reduce the impact that equity release could have on means tested benefits.

Andrea Rozario, director general of SHIP, explained: "Over the last nine months, the Government has announced changes that we believe will mean that those consumers who wish to take out an equity release plan can do so in the knowledge that they may not see certain benefits reduce or cease all together.”

The Government has changed the rules on the application of an Assessed Income Period rules (AIP) within Pension Credit for those aged 80 years old or over. From April 2009, these customers will no longer have their retirement income and assets reviewed every five years, nor do they need to report any changes that occur to these. In effect those aged 75 and over, if in an AIP will benefit from this change.

They have raised the capital threshold to £10,000 in Pension Credit and pension age Housing Benefit and Council Tax Benefit from November 2009, which means that pensioners can have up to £10,000 in savings without it affecting their benefit. If pensioners take out an equity release product and overall their savings remain at £10,000 or below, there will be no impact on their benefit payments.

David Wright of Equity Release Specialists Sixty Plus said “State benefits have always been one of the important matters to consider when looking at equity release so it is good news for everyone that the savings limit has been increased.”

2009-10-15T17:06:00.002+01:00

Independent advisers accounts for 74% of all equity release plans sold between July and September, according to figures from SHIP, reports Mortgage Strategy.

The adviser share of the equity release market has climbed 10% since the three months to June, continuing the recent trend for brokers to account for the majority of equity release business.

The equity release market is down 22% against the same time last year when total lending was £303.3m.

The number of new equity release customers dropped by 2.5% quarter-on quarter from 5333 to 5198, and has dropped 35% on an annual basis.

Average amounts lent through equity release increased by 3.9% in Q3 to £45,434, compared with £43,746 for the previous three months.

Andrea Rozario, director-general of SHIP, says:“The drop in the number of plans sold can be partly attributed to the funding issues that the industry is currently facing.

"While equity release providers are experiencing high levels of customer demand, a significant impact on the quarter’s business figures has been the lack of liquidity in the overall market which has restricted the lending activity of some providers and resulted in the withdrawal from the market of some others."

Sixty Plus Comment: It is pleasing that customers are becoming more aware of the importance of independent advice.

Research key to good equity release advice, says ERSA

2009-09-30T15:48:00.001+01:00

The key to good equity release advice is thorough research of the products on offer, according to the Equity Release Solicitors’ Alliance, reports Mortgage Strategy.

Members of the equity release legal trade body have ranked the aspects of advice equity release advisers need to focus on in order to ensure a high standard of advice.

Comprehensive research of all the providers, plans and products available was ranked as one of the most important features of good advice, after the legal requirement of specialist equity release qualifications.

Clarity of advice and the need to discuss alternative options to equity release from the start were also earmarked by ERSA members as essential factors in good advice.

Claire Barker, chairman of ERSA, says: “After the mystery shopping report from Which?, IFA advice has been placed under the spotlight. While many IFAs offer exceptional advice to clients, some are clearly not so thorough."

“Alongside financial and medical considerations for each client, no categories could be deemed ‘unimportant’, and we feel that some aspects simply cannot afford to be overlooked if clients are to feel informed about their decision before seeking specialist legal advice.”

Equity release shifting to independent advisers

2009-09-25T15:28:00.002+01:00

The withdrawal of Newcastle Building Society from equity release illustrates a move towards independent advices, says Dean Mirfin of Key.

"In this climate, there has been a shift away from direct salesforces. Consumers prefer to get independent advice" he said.

Newcastle is closing its Equity Release Service by the end of the year. In Retirement Solutions shut its doors in August.

David Wright of Sixty Plus said "In my view independent advice is by far the best way to obtain equity release advice. Going to a tied or multi-tied adviser means getting the best plan for you is down to luck rather than judgement."

Godiva Mortgages to pull out of Lifetime Mortgages

2009-08-28T14:14:00.002+01:00

More unfortunate news, Godiva Mortgages are withdrawing their Lifetime Mortgage from next week.

Interestingly this is not because of a lack of funds but "it is now difficult to offer a long-term rate which we believe is fair to customers". In other words, they have a choice to increase rates or pull out.

They've chosen to pull out because they can make more profit on mainstream lending - my interpretation of course.

This challenges the perception of Equity Release being too expensive. Although the bank base rate is only 0.5%, the cost of funding Lifetime Mortgages - which are fixed for life unlike mainstream mortgages - is no cheaper than it was a year or two ago; indeed some rates have crept up over recent weeks.

By the way, existing customers with a Godiva Lifetime Mortgage are not affected and Godiva hope to return to the market in the future.

In Retirement Services enters administration

2009-08-06T15:31:00.003+01:00

Following the closure of In Retirement Services, their Equity Release advisers will be seeking new opportunities.

We at Sixty Plus are building a growing team of advisers and we welcome enquiries from any specialist adviser looking to continue their Equity Release career.

Please contact David Wright on 020 8393 5566 for a discussion in confidence.

Parental equity could help first time buyers

2009-05-08T14:23:00.002+01:00

The mortgage industry should look into developing products that allow first time buyers to tap into the equity locked in their parents' homes.

This was the conclusion of research by Peter Williams, executive director of the Intermediary Mortgage Lenders Association, for the Building Societies Association.

This is an interesting point and, of course, the products for this already exist - equity release.

Indeed, with first time buyers typically being in their mid to late twenties, it may be that their parents are in their fifties and perhaps too young for equity release.

Grandparents may be the ones more likely to consider equity release to help their family onto the property ladder.

IFA, mortgage brokers or solicitors should contact me if they wish to discuss the possibilities.

Which? under fire for equity release comments

2009-04-29T12:07:00.001+01:00

The Association of IFAs (AIFA) has criticised consumer watchdog Which? after it hinted its report into the quality of equity release advice given by intermediaries will be far from glowing, reports IFA online.

Chairman John Gummer MP says Which? "talks as though IFAs behave badly naturally", adding he disapproves of its suggestion equity release should be a last resort.

It follows comments made today at a debate hosted by solicitor Eversheds and trade body Safe Home Income Plans (SHIP).

Speaking at the event, Which? spokesperson Teresa Fritz said the consumer body was in the process of conducting a mystery shopper exercise on a number of equity release advisers.

Although Fritz pointed out the study is still at an early stage, she admitted early results suggest a poor level of advice, with conduct of business rules ignored.

But Gummer hit back: "Which? talks as if we in the industry are a group of people that behave badly naturally.

"I do not like its statement equity release should be a last resort. It is an option that should be considered carefully. We do not want to frighten off people for whom this is the best option."

Gummer adds while intermediaries provide a good standard of advice, they cannot force clients to follow it.

Base Rate Collapse Cuts Pensioners’ Income By Nearly A Quarter

2009-04-21T17:02:00.001+01:00

The slide of interest rates to historically low levels has seen more than 8 million pensioners’ monthly income fall by nearly 25% over the last 12 months, according to figures from SHIP (Safe Home Income Plans), the equity release trade body.

SHIP’s figures show that, in April 2008, the average pensioner received £158 per month from their savings. This was in addition to their pension and accounted for 28.62% of their total income.

The fall in base rate has seen that income slide to just £16 per month, or 4% of their total income.

With perhaps little chance of bases rates rising to last year’s levels soon, pensioners need to consider alternative sources of income. On such possibility for homeowners is equity release.

Equity release can offer a real solution to pensioners’ problems. For example, a 75 year old woman with a property worth £300,000 could release up to £900 per month for 15 years. This would more than cover her loss of income.

“One solution for those pensioners needing to boost their income is equity release. The over 60s can release some of the wealth tied up in their property and increase their retirement income substantially should they wish” said Andrea Rozario, Director-General of SHIP.

Equity Release and the Credit Crunch

2009-03-17T18:06:00.019Z

It seems impossible to turn on the TV or radio without hearing of doom and gloom of the credit crunch, falling house prices, rising unemployment and ailing banks.

So, how has this affected Equity Release?

Perhaps less than you might imagine.

All of the major Equity Release providers are still very much around.

Whilst a few companies have withdrawn from the market, it is fair to say they were bit part players anyway.

Most Equity Release plans are lifetime mortgages and here we have seen little impact. You can release pretty much the same percentages as before.

Although the Equity Release sector appears to be more resilient than the mortgage market, it may be affecting some potential clients.

It seems that some people are standing still, even it they’re not quite sure why. The constant bad news makes them uncertain. Uncertainty breeds inactivity.

Is this the right approach?

Possibly not. With the cost of living ever rising, the need for Equity Release is greater than ever.

Drawdown plans

Our typical client uses Equity Release to provide a certain amount for today with a drawdown facility they can call upon in the future.

For example -

In 2007, Mrs Jones was 70 years old and wanted £30,000 from Equity Release plus the facility to release more if she wants to in the future. Her house was worth £300,000.

She could have released the £30,000 and have a further £60,000 to drawdown in the future as and when she chooses.

Now in 2009, having delayed taking Equity Release her house is worth £250,000 and she is 72.

She can still release her £30,000 but the drawdown facility has reduced to £50,000.

So the total amount available to her has reduced from £90,000 to £80,000 – this makes no difference to her current plans – she can still have the £30,000 she needs now with the facility for plenty of extra money for the future.

Introducing Chris Grenan

2009-01-30T14:37:00.005Z

Sixty Plus are delighted to welcome Chris Grenan as Business Development Manager.

Chris has more than 30 years experience in financial services and will be developing relationships with IFAs and solicitors as well as arranging seminars with interested groups.

David Wright, Managing Director, said "Chris joins us at a time when economic woes are constantly in the headlines. However, Equity Release is proving more resilient than other sectors and we are optimistic about the coming year."

We aim to make Sixty Plus a major name in Equity Release in the South East and we believe relationships with IFAs is key to this aim. With advisers in Surrey, Kent and Essex we are well placed to cover the whole region."

Chris can be reached on 07949 949590 or click here to email Chris.

ERSA formally launches

2009-01-29T15:01:00.002Z

The Equity Release Solicitors’ Alliance (ERSA) has formally launched today, with each of the body’s members committing to a charter outlining their promise to provide independent, personal level of service in plain English, reports Mortgage Solutions.

Other commitments include that clients will receive a personal consultation, fair and balanced reports in writing, service level agreements, and all members will offer a no-completion, no fee service. For IFAs, ERSA also guarantees that intermediaries will be paid their fees on the day of completion.

ERSA is a group of established law firms which specialise within the area of equity release, which has joined together to promote the need for homeowners to have access to independent, competitively-priced expert legal advice before they take up an equity release plan.

Claire Barker, chairman at ERSA, commented “If current predictions are correct, the equity release market will double in the next five years, and by 2016 it is estimated that 42% of the population in England and Wales will be eligible to take out an equity release plan. With the market expected to grow at such a rate it is essential that all of these consumers are receiving the best possible legal advice before proceeding with a plan.

“Solicitors have to remain independent to ensure that homeowners only take out an equity release product once they have carefully considered the pros and cons of going ahead from an unbiased third party. This will also help to ensure that the future reputation of the industry remains intact.”

Sixty Plus comment: We welcome this development as independent legal advice is integral to the process of arranginging an equity release plan. It will help us to demonstrate to clients those firms that are as committed to equity release as ourselves.

Sixty Plus joins 'Buy with Confidence'

2009-01-29T14:49:00.002Z

We are pleased to announce that Sixty Plus has been accepted into Surrey Trading Standards' Buy With Confidence scheme.

All the businesses in the scheme have been vetted and approved by Trading Standards to ensure that they operate in a legal, honest and fair way.

"We are keen to go the extra mile to show potential clients that we are the people to see for honest, independent advice on Equity Release." said Managing Director of Sixty Plus, David Wright.

Equity release remains resilient

2009-01-29T14:33:00.001Z

Equity release suffered a 9 per cent decline in value of lending and 4 per cent fall in plans sold in 2008, according to Safe Home Income Plans, reports Financial Adviser.

In its full year results to 31 December, Ship said despite the drop in lending, equity release was remaining resilient compared with mainstream lending which, according to the Council of Mortgage Lenders, declined by 30 per cent during the same period.

The results showed the total value of equity release business written in 2008 reached almost £1.096bn, a 9 per cent decrease on last year's figure of £1.21bn

The number of new policies sold declined 4 per cent, from 29,293 in 2007 to 28,224 in 2008.

Sales of lifetime mortgage products dropped by 2 per cent year-on-year, from 27,764 plans sold in 2007 to 27,161 in 2008.

Meanwhile, the value of advances from lifetime mortgage products fell by 8 per cent from almost £1.128bn in 2007 to £1.038bn in 2008.

Home reversion products saw a decline in 2008, with the number of policies down 30 per cent to 1063, compared with 1529 in 2007.

The value of equity released with these products also declined 30 per cent from £82.6m in 2007 to £57.4m in 2008.

Almost two-thirds of products sold in 2008 were through intermediaries rather than through direct sales, something that remained unchanged from the previous year.

Andrea Rozario, director general of Ship, said: "A slight decline in business volumes in 2008 was to be expected given the turbulence in the economy in the last 12 months.

"Overall we are pleased with how the sector has held up, especially in comparison to mainstream mortgages."

Providers tip upswing in equity release market

2009-01-08T14:38:00.001Z

Confidence in the equity release market remains high, with over 90 per cent of providers optimistic about the outlook for new business in 2009, mainly due to interest rate reductions, reports Financial Adviser.

Equity release providers have a measured confidence in the growth of the market for the year ahead, according to research from equity release trade body Safe Home Income Plans (Ship).

In the fourth annual Ship member survey, over 90 per cent of providers said the volume of new business would increase in the next year.

Looking to the long term, the general predictions given were that the market would grow by over £200m a year, increasing to £1.4bn in 2009 and £1.7bn in 2010.

Over two thirds of providers (67 per cent) felt that a strong driver for this growth would be interest rate reductions on equity release plans in the next quarter.

The research found that the majority of lenders predict most growth to be in flexible drawdown options.

Providers believe that drawdown will account for 70 per cent of the market by 2010, with 80 per cent of respondents pushing for more providers to offer a drawdown option.

Less than half of those polled (42 per cent) think that the lifetime mortgage business will increase in the first quarter of 2009, and in a departure from the 2008 predictions, 83 per cent think the number of home reversions sold will decrease or remain static in this period.

This market growth will offer IFAs real opportunities during 2009 - 89 per cent of providers have already seen the number of referrals from IFAs increase in the past year.

Andrea Rozario, director general of Ship, said: "The wider economic situation means that 2009 will be an unpredictable year. Many repercussions from 2008 will continue to be felt across the industry as a whole.

"This survey has shown that Ship members remain confident in the future of the equity release market, as they consider the long term prospects.

"The jump in the number of IFA referrals to providers shows that although there is still a need to educate IFAs about the benefits of equity release, the industry is coming together to recognise and promote the benefits of equity release."

Equity release market to reach £2.4bn by 2013

2008-12-18T14:43:00.000Z

The equity release market is likely to be one of the few sectors to actually benefit from the economic downturn, and is expected to double in size to £2.4bn by 2013, reports Financial Adviser.

Due to the current economic turmoil and its effect on retirees' savings, the equity release market will probably see a boost over the next few years, Norwich Union claims.

Combined with the endemic lack of retirement funding, the potential entry into the market by high street banks and building societies, and the Government emphasis on 'self funding' for retirement, the market is predicted to grow to £2.4bn by 2013.

This would be double the amount released in 2007 (£1.2bn) and would see more than 1.5 per cent of UK over-65 homeowners using these products each year to increase their income and enjoy a better standard of living in retirement.

The provider has estimated that 115,617 consumers are due to purchase 70,500 plans in 2013, which is a clear indication that as the population ages and the retirement funding gap grows over the next five years, equity release will become increasingly important.

Anthony Rafferty, head of marketing for post retirement at Norwich Union, said: "While the economic turmoil has been hugely detrimental to many parts of the UK economy, it may actually stimulate growth in the equity release market.

"Going forward, we see the market doubling over the next five years and truly coming into its own as a mainstream retirement planning and funding tool."

SHIP providers buck market trend

2008-07-16T17:44:00.000+01:00

Equity release trade body Safe Home Income Plans (SHIP) has revealed that business volumes produced by its members in the second quarter of the year have increased by 14% over volumes in quarter one, reports Mortgage Solutions.

A total £275.7m of equity was released by SHIP members in the second quarter, 14% higher than the £242.7m released in the first quarter.

Andrea Rozario, director general of SHIP, said results underlined the robust health of the equity release sector despite the impact of the credit crunch that was having such a negative effect on the mainstream mortgage market. She explained: “It also serves to highlight the distinctly different forces that drive the equity release market relative to the mainstream market, including the fundamental pressures of the UK’s ageing population, falling levels of pensions contributions and the very high levels of personal wealth held in housing equity.”

SHIP said that in terms of distribution, the intermediary channel continued to dominate, although the percentage of total equity release business carried out relative to the direct channel fell slightly from 74% in the first quarter of 2008 to 71% in the second quarter.

Equity release and the credit crunch

2008-07-03T10:51:00.000+01:00

How is the credit crunch affecting equity release?

Product wise, not at all. There are no signs of any providers being short of money or changing their products.

As for potential clients, the impact seems to be more significant.

It seems that some people are standing still, even it they’re not quite sure why. They see constant stories in the media about falling house prices, rising costs of petrol, electricity, gas and groceries. Uncertainty breeds inactivity.

Maybe they are thinking “Things are uncertain and I don’t feel confident, so I will hold off doing anything.”

Is this the right approach?

Probably not. With the cost of living always rising, the need for equity release is greater than ever.

If the concern is about falling house prices, then the situation may get worse before it gets better. In which case, delaying action for a year or two may reduce the amount clients can release.

People should only take action that they feel confident about, but it is important to remember the guarantees that equity release plans from SHIP members provide.

Furthermore, with plans available that guarantee a proportion of the property can be protected as an inheritance, there is a strong case to be put for not letting the current concerns cause a delay in action.

Equity Release Solicitors Alliance is launched

2008-06-11T16:33:00.001+01:00

The Equity Release Solicitors' Alliance was officially formed last week with six founding members, reports Mortgage adviser (11/6/2008).

The alliance, consisting of Ashfords, Birchall Blackburn, Equilaw, Goldsmith Williams, Gywn James and Lees Lloyd Whitley, will meet regularly to discuss issues impacting on the equity release market place, particularly from a legal perspective.

Claire Barker, chairman of Ersa and partner with Equilaw, said the founding members would meet regularly to debate industry issues and work together to ensure financial advisers had access to lawyers who shared the same vision.

The alliance will be an incorporated body with its own logo and website and members will abide by the terms of a written constitution.

Ms Barker said the group hoped to form affiliations with trade bodies, such as Safe Home Income Plans, the Law Society and the Association of Mortgage Intermediaries.

She said: "I am delighted to form an alliance with five like-minded firms to show that there are solicitors out there who have taken the bull by the horns and are committed to equity release as a specialist area of legal practice."

David Wright, managing director of Surrey-based advisers Sixty Plus, said the alliance was a good development in the equity release industry and he would like to see something similar set up for advisers.

Sixty Plus calls for change to ERCs

2008-04-04T14:09:00.002+01:00

We would like to see all lifetime mortgage lenders relax their policy on early redemption charges.

Currently ERCs are waived in the event of a client dying or entering long term care. They are also waived on partial repayments due to downsizing. However, they are applied if the client does not port a certain amount of the lifetime mortgage and instead repays in full.

When a client expresses a possible future intention to sell their property and repay the whole plan, several lenders are impossible to recommend because they have ERCs that range from 0-25% subject to interest rate or gilt movements. Their products may be otherwise perfect for the client but we have to exclude them from.

In reality many of these clients may never sell but they want the option without the threat of a potentially huge penalty.

A change would be in everyone's best interests. It would give the lender more business and give clients more choice.

David Wright

SHIP floats exam table

2008-03-18T14:07:00.000Z

Safe Home Income Plans (SHIP) has produced a qualification requirements table for intermediaries, reports Mortgage Solutions (17/3/2008).

The table, which is available on SHIP's website, lists the examinations needed to submit lifetime mortgages and home reversion plan business to SHIP's product provider members from 6 April.

Andrea Rozario, director general of SHIP, said the table had been produced to clear up any potential misunderstandings ahead of its deadline for advisers to pass their top-up exams. She said: "Confusion about the compulsory examinations needed by advisers for each aspect of equity release might have arisen as a result of Lifetime Mortgages and Home Reversions being regulated at different times."

Simon Smith, IFA at Independent Retirement Strategies, said a clarification of examinations would clear up any questions from brokers. He said: "Brokers need to know what they can and cannot advise on."

David Wright, managing director of provider Sixty Plus, said the table looked like a concerted effort by providers and bodies in equity release to provide more information to the market. He added: "Moves like this should increase trust and take up of equity release."

Abbey research hints at equity release launch

2008-03-18T13:58:00.002Z

Abbey has reportedly been cancassing intermediaries regarding a potential launch into the equity release market, reports Mortgage Solutions (15/03/08).

This would not be the first time Abbey has dabbled in the equity release market, having previously joing SHIP.

Abbey also has a toe in the market through Stonehaven, although this is only a funding arrangement.

Godiva rides into equity release market

2008-03-05T17:57:00.004Z

Godiva Mortgages, the intermediary arm of the Coventry Building Society, has entered the equity release market with a range of lifetime mortgages.

The range includes lump sum and drawdown products and Godiva is the first lender to offer an option with no early repayment charges.

Colin Franklin, managing director of Godiva Mortgages said: "I am delighted to be entering this growing market. Changing attitudes to retirement planning and increasing confidence in the sector, shows there is a genuine need for this type of product.

"For the first time, advisers will have access to drawdown and lump sum products without ERCs – a major step forward in the market place."

Sixty Plus comment: This is the most interesting development for some time. As the first lender to offer a product with no early repayment charges Godiva is a welcome addition. Some clients take equity release with the clear intention or repaying it in the short to medium term by moving house and downsizing. The absence of an early repayment charge that would normally be at least 5% will make equity release more appealing to some.

IFA sales up while direct business drops

2008-02-15T17:07:00.002Z

Intermediary sales rose 25% in 2007 according to figures released by trade body SHIP (Safe Home Income Plans).

Sales through intermediaries rose from 14,799 in 2006 to 18,531 in 2007.

Meanwhile there wasa drop in direct sales from 12,973 to 10,762.

Overall business increased by 5.5% in the number of plans and the total value rose 5% to £1.21bn.

These figures were held back by a disappointing 4th quarter when the total value of business written fell by 9% on the corresponding period in 2006. However, this compares favourably to a 12% drop in gross mortgage lending by all mortgage lenders.

Sixty Plus comment: It is pleasing to see direct sales fall from 46% to 36% but this still means that more than one in three clients go direct to a product provider for equity release. It is our view that clients will only get the best plan for their needs by luck rather than judgement if they choose this route and that independent advice is essential when considering equity release.

Home reversion set for 2008 boom

2008-01-23T16:46:00.000Z

Home reversion has been predicted to be a major sector of growth in 2008 and equity release brokers advising on only lifetime mortgages must take steps to enter into the market, it has been claimed, reports Mortgage Introducer (19/1/2008).

Dean Mirfin, business development director for Key Retirement Solutions, stated that 2008 would be the year that home reversion came into its own, but added that much of its growth, and that of equity release would be dependent on how the housing market performs over the coming year.

Mirfin said: “In a pessimistic climate, home reversion is the more popular option. Advisers need to be advising on both options, not just one. To restrict what you can offer a client doesn’t make any sense. We know there are a lot of brokers that have never sold a home reversion.”

He added that it made sense to take the home reversion exam, as equity release advisers were obliged by the regulator to discuss all options with a client anyway – even if they were not qualified to arrange a home reversion plan.

The regulator will require advisers to have a home reversion qualification by April 2009, yet advisers will most likely be forced into it a year early with Safe Home Income Plans’ requirement of the qualification beginning from April 2008.

Equity Release draws younger audience

2008-01-23T16:38:00.000Z

Research has revealed the age of retirees turning to equity release has fallen significantly for the first time, prompting commentators to suggest more people are retiring with insufficient pension provision, reports Mortgage Solutions (21/1/08).

Results from Key Retirement Soluntions' annual Equity Release Market Monitor showed the average age for pensioners seeking equity release dropped from just under 70 in 2006 to 68 last year.

Speaking at its equity release roundtable event, Dean Mirfin, business development director at KRS, said the drop in the average age was more significant than it looked at first glance. He added: "We expect the average age seeking equity release to creep lower and lower."

Stuart Wilson, managing partner of Equity Advice, agreed the average age was dropping, suggesting it could have "ramifications" for the market in the long term. He said: "If you look at the generation taking out equity release today, many have been with their employers for 30-odd years and have final salary pension schemes to rely on. The generation that will come into the equity release market in 20 years' time no longer has that."

Wilson added: "There will be a huge issue with pensions for the future generation."

Andrew Dixon, marketing and sales manager at Bridgewater Equity Release, said people were now retiring with less capital available to them, adding: "This is one of the main reasons why equity release is going from strength to strength."

Sixty Plus win at the 2007 Equity Release awards

2007-12-04T18:19:00.001Z

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

2007-12-03T18:26:00.000Z

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

2007-11-16T10:54:00.000Z

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

2007-11-02T17:45:00.000Z

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’

2007-10-02T11:12:00.000+01:00

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

2007-10-02T11:10:00.000+01:00

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

2007-08-29T11:30:00.002+01:00

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'

2007-07-17T12:41:00.000+01:00

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

2007-07-05T15:45:00.000+01:00

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

2007-06-15T15:51:00.000+01:00

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'

2007-05-24T11:44:00.000+01:00

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

2007-05-03T11:03:00.000+01:00

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

2007-05-02T16:47:00.000+01:00

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’

2007-04-26T16:13:00.000+01:00

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

2007-04-05T12:18:00.000+01:00

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'

2007-04-03T15:14:00.000+01:00

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

2007-03-15T11:21:00.000Z

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

2007-03-13T11:15:00.000Z

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

2007-02-20T11:05:00.000Z

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

2007-02-16T12:01:00.000Z

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

2007-02-02T16:35:00.000Z

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

2007-01-25T16:45:00.000Z

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

2007-01-20T16:47:00.000Z

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

2007-01-20T16:45:00.000Z

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

2007-01-20T16:35:00.000Z

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

Neville James breaks new ground for 'non-standard' home reversions

2006-12-21T16:51:00.000Z

Chichester-based firm Neville James has launched a white-labelled home reversion product, specialising in non-standard constructions and unusual properties, reports Mortgage Solutions (18/12/06).

Better known for its work in the traded endowment policy (TEP) market, Neville James has teamed up with Crown Equity Release to offer the product.

Karen Gill, managing director of Neville James, said the decision to enter the market was an easy one, adding: "There are a lot of synergies between the TEP and equity release markets, as they are both specialisms, dealing with clients who need to access money. There are also similarities with TEPs where you need to transfer legal title clearly, which is similar to conveyancing a house."

Neville James is targeting clients with flying leasehold properties, short-term leases, agricultural properties and properties in Scotland. But Gill said: "We are not bound by immovable barriers." Operating as a regulated firm, it has decided not to become a member of Safe Home Income Plans (SHIP) at this stage.

SHIP challenges Which? To debate equity release concerns

2006-12-11T16:52:00.000Z

Safe Home Income Plans (SHIP) has called on Which? To contribute to a sensible dialogue on equity release that will benefit consumers, reports Mortgage Solutions (11/12/06).

SHIP chief executive Jon King said Which? seemed unwilling to accept market forces meant equity release was increasingly becoming part of retirement planning. He said SHIP wanted to publicly repeat its invitation to Which? To work with SHIP, to improve the equity release sector, making it cheaper and more accessible to consumers.

King said “We invite Which? To submit any sensible recommendations for a next step, to sit on our independent complaints board or otherwise contribute to a sensible dialogue that will benefit consumers.”

Need for equity release 'remains strong'

2006-12-05T16:53:00.000Z

There is a social need for equity release according to Marion Hatfield, a consultant for the government on pension provision, reports Mortgage Introducer (2/12/06).

Speaking at the Retirement Plus roundtable event on the future of equity release, Marion Hatfield said "I see equity release as another income stream for people who have inadequate pension provisions and are becoming more reliant on their own self-provision. I believe equity release will become a mainstream product that will help to fund many people's retirement."

Sixty Plus comment: We agree that there is a social need for equity release. However retired homeowners are using equity release for lifestyle choices as well. This may be improving quality of life, home improvements or helping children or grandchildren onto the property ladder.

Equity Release intermediaries call for qualified adviser list

2006-12-04T16:54:00.000Z

Equity release intermediaries have called for a list of qualified advisers to be provided to inform consumers about access to independent advice, reports Mortgage Solutions (4/12/06).

The call for a list came as the Financial Services Skills Council (FSSC) said it prepared to publish its examination standards for home reversion plans.

Sixty Plus comment: This could only be a positive move.

We have seen several reports this year that there is a lack of qualified equity release advisers so the more that is done to help people find advice, the better for all concerned.

Life expectancy disparity leads to debate on postcode-based products

2006-11-27T16:56:00.000Z

Figures from the Office for National Statistics show wide disparity in life expectancy for 65 year olds across the country, which will have implications for the quity release market, reports Mortgage Solutions (27/11/06).

Men aged 65 can expect to live 16.6 years and women 19.4, however, regional variations show that in Kensington and Chelsea men expect to live to 82.2 while in Glasgow it is 69.9.

Some providers already offer deals on impaired lives.

Jon King, chief executive of Safe Home Income Plans, said “I am not aware of an annuity that pays more on postcode. You need an impairment to have an impact on loan-to-value rates. The same surely should apply for equity release products. It is not possible to devise products on a postcode basis.”

Stonehaven move into equity release

2006-11-23T17:01:00.000Z

A new equity release provider has rolled out its range, reports Financial Adviser (23/11/06).

Stonehaven caught attention in August when it piloted new products such as build-your-own and flexible cash release.

Following a successful pilot, Stonehaven was approved by Safe Home Income Plans in November.

The equity release market is thought to be worth £1.4bn a year, of which £800m comes through intermediaries.

Jayne Almond, Stonehaven’s chief executive officer, said “It is an exciting time for the market. Attitudes towards inheritance are quickly changing. We want to grow consumer confidence in equity release products and ensure advisers are well placed to confidently advise products.

The flexible cash release product provides a drawdown facility. It can be taken either in a lump sum or as regular payments. The build-your-own product enables the adviser to develop a bespoke product.

Equity release from high value property is a ‘lifestyle’ choice

2006-11-20T17:06:00.000Z

Industry figures have reported an increasing number of equity release transactions taking place on higher value properties, reports Mortgage Solutions (20/11/06).

Michael Philps of Hinton & Wild said it had seen a definite increase in higher value properties being used for equity release. “It is not £200,000 or £250,000 anymore. It is real lifestyle type customers rather than desperation sales these days. They do not have to take out equity release but, for whatever reason, they choose to.”

Customers are becoming more aware of the inheritance tax burden while others simply wanted to provide their beneficiaries with money while they were still alive.

Nationwide ponders equity release move

2006-10-26T17:08:00.000+01:00

The Nationwide Building Society has admitted it is considering a move into the equity release market following the merger with the Portman Building Society reports Financial Adviser (26/10/06).

Tim Hughes, head of intermediary markets for the Nationwide, said the society had been undertaking a thorough review of the sector.

"The research we have carried out was very much focused on whether the product is likely to become more popular in the future."

Simon Little, chairman of the mortgage prudcut board for Safe Home Income Plans, said "We would welcome them entering the market."

Sixty Plus comment: A major new entrant such as Nationwide would give a great boost to the equity release market. The resulting publicity which would create greater awareness and confidence in equity release.

Report calls for local authorities to provide equity release

2006-10-19T17:12:00.000+01:00

Local authorities should provide equity release mortgages to give the market much needed impetus, say the Joseph Rowntree Foundation as reported by Money Marketing (19/10/06).

A study by the foundation says a drastic solution is required to resolve the problem of consumers having little faith in the market without more high street brands being involved, while many brands will not enter the market until it is bigger.

It also calls for restrictions on means tested benefits to be relaxed so potential borrowers are not put off.

This follows consumer lobbyist Which? Saying in January it wants the government to lead the equity release market into the mainstream.

Prudential predict equity release market will double in two years

2006-10-19T17:10:00.000+01:00

Prudential believes the equity release sector is liley to doublt to well over £2bn in the next two years reports Money Marketing (19/10/06).

Lifetime mortgage director Ali Crossley says such a rise is well below what many would hope for but is realistic.

Prudential has launched a team of 20 advisers because of the lack of Independent Financial Advisers in the sector.

Sixty Plus comment: It is entirely realistic that the market may double as there is certainly increasing demand for equity release.

It is of some concern that providers are launching their own sales force as clients should always seek independent advice.