Intermediaries and lenders have refuted accusations from Which? magazine that the equity release market is expensive, inflexible and should only be used as a last resort.
In its equity release report, Which? said the average rate of 7% for roll-up mortgages meant customers would accrue large debts quickly, and for reversion schemes the money paid for the share of the house sold was well down on market value. It also warned that reversion products currently remain outside the Financial Services Authority’s (FSA) remit for market regulation.
Helen Parker, editor at Which?, said: ‘We advise people considering equity release schemes to view them as a last resort.’
However, Dean Mirfin, director of intermediary, Key Retirement Solutions, said: ‘If you compare equity release with other methods of borrowing, it is not bad.’
He pointed out that alternatives, such as a serviceable loan with monthly repayments and downsizing to another property, were not suitable options for many, while, due to age restrictions, the elderly were also not eligible for the same amount of capital-raising options as their juniors.
He continued: ‘It is not right to consider it as a last resort, but as one of the options available. If it was not right for someone, then we would be the first to tell them.’
In terms of future regulation, a spokeswoman for the FSA said: ‘The Treasury decides the scope of what we regulate, and then we work to our brief, so the issue of home reversion schemes is a matter for the Treasury. It has said it will be consulting in the Autumn on whether or not the products should be regulated, so we will have to wait and see.’
She agreed with the Which? report, saying FSA regulation would raise the standards of the equity release products it would cover. ‘Our new regime will raise standards, so the consumer will get unbiased advice and clear comparable information about both the service they are getting and the mortgage itself.’
Jon King, chairman of standards body, Safe Home Income Plans, added: ‘There is nothing unexpected in this and a lot of emotive language has been used, which does not reflect what is happening in the equity release market.’
He said the equity release market was the fastest-growing area in financial services, and was clearly ‘doing something right.’