The Council of Mortgage Lenders has given its backing to equity release schemes and is urging lenders to do the same in a bid to help borrowers cope with the costs of old age, including long term care.
Speaking at the recent CML annual lunch, Philip Williamson, CML chairman and retail operations director at Nationwide Building Society, said over £800bn in assets had been built up by homeowners who may need to access these funds to pay for long term care.
He said: “The management of equity release is a key issue about which the industry will require increasing guidance. A clear regulatory structure is a fundamental precursor for consumer, lender and potential investors’ confidence.
“The CML will continue to develop its thinking regarding the way forward on this important issue to forge a consensus for policy development.”
Nick Richards, head of marketing and product development at GE Life, said the group welcomed any initiative to boost awareness of equity release as a viable and safe financial option and would even consider partnership arrangements with suitable lenders.
But he warned: “We would be looking for the equity release market to be developed only in a regulated environment so that customers are fully protected. As a member of SHIP (Safe Home Income Plans) we do not want to see a repeat of the problems experienced by some elderly people in the late-1980s.”
Regulation of equity release mortgages will fall to the Financial Services Authority.
Michael Bolton, marketing manager at sub-prime lender Future Mortgages, said: “With property values at current levels, equity release products, nicely dovetailed within the protection market, seem to be the way forward.”
Williamson added that the safety net for borrowers in arrears had significant flaws, which was why the CML was working hard to promote MPPI to bridge the gap between lender forbearance and State benefits.
But he said: “The reality is that there are still many borrowers who need cover but do not have it. The challenge for the industry is to reinforce the importance of MPPI to protect borrowers.”