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Equity Release is here to stay

The anticipated boom in the equity release market did not materialise in 2006 as expected. However, there is a steady growth in the market which is widely predicted to mushroom as the population ages and pension provisions continue to fail to meet living expenses.

There are a number of barriers to the expansion of this market. There is a severe lack of specialist financial advisers in this area. Adverse comments reported in the national press over the years has unnerved financial advisers and many are reluctant to enter this arena. "Which?" Magazine also published a report citing equity release as "a product of last resort" and accuses companies of pushing equity release as a "luxury product" which has done nothing to offer comfort. However, the national press is gradually beginning to take notice because equity release is not going to disappear. It seems that there is a real need for these products but the key is to ensure that clients have been properly advised.

The Financial Services Authority (FSA) now regulates Lifetime Mortgages and has carried out two mystery shopping exercises on firms of financial advisers to look into how equity release mortgages are sold. Unfortunately, the results were fairly damning for those firms which were dabbling with equity release. However, the results for specialist firms were encouraging and these firms reacted by setting up referral partnerships with non-specialist advisers so that clients could always be certain to receive best advice. The financial press has also climbed aboard and set up dedicated national roadshows to entice more advisers into the market.

Home reversions, where a percentage of a property is sold to an investor or bank and a client retains the right to remain living there, are not yet regulated by the FSA. This is due to change in April. At the moment, reversions account for a very small proportion of equity release products but an upturn is expected once they are regulated as confidence in this sector increases.

If the market is to expand, product innovation will continue to be essential and the consumer body, Safe Home Income Plans (SHIP), plays a vital role in this. SHIP is made up of a board of mortgage lenders and reversion providers who abide by a code of conduct and, for example, introduced the "no negative equity guarantee" into all of its members' products. This ensures that when a property is finally sold and the equity release plan is repaid, the value of the house is the maximum that can be taken by the product provider. The SHIP members continue to tailor their products to suit the demands of the market place. SHIP has also confirmed that it will not take applications from financial advisers who have not passed an exam in equity release advice from August.

Specialist independent legal advice is also important to any homeowner thinking of entering into an equity release plan. The Rickerbys' equity release team has become one of the most popular legal advisory services for Equity Release in the country. Therefore, to reinforce its commitment to clients and reflect its national presence and core values, the team is delighted to announce the rebrand of its service as "Equilaw". For further information, please contact the Equilaw team at [email protected] or visit www.equilaw.uk.com.


For further information contact:
Ailsa Sanders, Senior Marketing Executive
Rickerbys
Ellenborough House
Wellington Street
Cheltenham
GL50 1YD

T: 01242 224422


 

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