Equity release is in demand against a lack of advisers

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

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

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

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

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

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

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

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

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

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

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

Lifetime mortgages guidance published

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

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

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

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

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

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

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

Lack of high street lenders holding Equity Release back

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

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

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

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

Equity Release remortgage market set for growth

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

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

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