Equity release is there to help people aged over 55 take out a loan based on the value of their home. Like a mortgage, homeowners are still able to live in and own the property. Interest is charged on the loan amount; however, it builds and is paid off when the homeowner passes away or goes into care. Equity release essentially provides additional finance for retirement.
A recent survey has uncovered evidence that equity release advisers have wrongly informed consumers about the options available and what is best for their circumstances. In a survey of 100 advisers, 22 admitted that they didn’t ask health questions when discussing a loan. This is worrying considering that such questions should be routine and vital when homeowners want to take out a loan. A consequence is the amount of interest payable on the loan can be considerable, which will fall to the next of kin to settle.
Over the past 3 years, equity release has significantly increased. This has led to a tripling of deal options with 78 now available to consumers. What’s more, many of these new options have new features that are specifically designed to protect the consumer.
When it comes to the advisers themselves, some may not even specialise in equity release, so they could be recommending the wrong deals to borrowers. In the past few years product innovations have been made. If advisers aren’t up to date, their customers can’t fully benefit.
One of the biggest concerns regarding downsizing protection. This is a scheme specifically designed to ensure that consumers don’t encounter any early repayment charges, if they sell their home and move to a new but smaller property. Early repayment charges are one of the most common complaints by clients, along with the overall suitability of the deal they’ve taken.
An awareness of what is available and being honest with borrowers will allow advisers to avoid issues in the long term. So far, The Equity Release Council has offered some solutions. They have published a checklist of 13 important points to outline in the advice process. When assessing the client’s suitability for equity release, they will be able to assign the most beneficial deal possible. In addition to this, The Equity Release Council also hosts professional development sessions to properly train advisers and keep them up to date. So far, these are ongoing. Regular market data is also published to members and the wider industry, so that anomalies can be found and addressed quickly.
If there’s a chance that you’ve been mis-sold equity release and you’re concerned, contact the Financial Ombudsman Service.
