You are here: Home - News -

Equity release is sold inappropriately, warns broker Mortgage Talk Direct

by:
  • 05/09/2002
  • 0
The growth in the popularity of equity release schemes has resulted in some borrowers being sold pac...

The growth in the popularity of equity release schemes has resulted in some borrowers being sold packages that are inappropriate to their needs, according to broker Mortgage Talk Direct.

Andy Frankish, director of Mortgage Talk Direct, said: ‘Although I believe equity release schemes are a useful mortgage product, some borrowers see them as a way of obtaining a loan greater than they would norm-ally qualify for. There are situations in which buyers will be tempted to over-commit themselves.’

He added that brokers should undertake affordability calculations in order to pre-qualify applicants looking at equity release: ‘Brokers should explain the significance of the client’s monthly commitment and produce a statement clarifying the implications of failing to meet obligations. This should be signed by the client as acknowledgement.’

Equity release provider Key Retirement Solutions has also warned of problems concerning this sector. It said there is a potential for mis-selling with the omission of reversion policies from Financial Services Authority (FSA) regulation in 2004. The FSA regulation states lifetime or ‘roll-up’ arrangements, will be regulated from 2004 and reversions schemes will be left out.

While a roll-up scheme involves the remortgaging of equity in a property, a reversion policy sells part of the property to an equity release company. The homeowner receives a lump sum and any equity gain is divided on the sale of the property.

Colin Taylor, managing director at Key Retirement Solutions, said: ‘The industry established Safe Home Income Plans (SHIP) which is dedicated to the protection and promotion of safe schemes. But there are home reversion plans and advisers that remain outside the remit of SHIP and the FSA. We are concerned the mixture of unregulated products and unregulated advice could lead to future mis-selling.’

Jon King, chairman of SHIP, agreed: ‘Our representations to the FSA made it clear we wanted reversions regulated, and we are disappointed they are not. People asked before the regulation was released what the future of SHIP was. This omission makes SHIP more important.’


Tags

There are 0 Comment(s)

You may also be interested in

Business Skills

In this section, we offer short ‘how to’ guides on harder to crack areas of business. From social media, to regulation or niche product areas, we cover it all.

Profiles

Our journalists interview key industry entrepreneurs, strategists and commentators for day-to-day market insight and a strategic view of where the industry is heading. We offer lessons for success and explore the opportunities for your business

Success in Practice

Here, we share case studies fleshing out best practice to help you decide what could work for your business. Take a look at how others approached complex tasks like launching a new mortgage lender, advising on a new product area or deciding to specialise in another. Learn from others mistakes and triumphs.

Marketwatch

Each week, we ask top mortgage and property commentators with a unique perspective to examine a key news headline, market move or regulatory or political issue.

Poll

Vote in our weekly poll here. It’s your chance to tell us what you think and be heard on the top news stories of the week. Review our archive to find out what your industry really thinks and all our coverage of the results.

Top Comments

Be part of the conversation on Mortgage Solutions. We want to hear from you. We have a tool called Disqus to tell us which stories get the most comments each week. Every Friday, the team picks the most thoughtful or opinionated contributions from our readers to enjoy again. Don’t forget to share your favourite stories from the site on social media to keep the conversation going.
Read previous post:
Government building homes for cash-strapped key workers

Government aims to meet rising demand for affordable property by injecting £1.4bn into new homes

Close