The Council of Mortgage Lenders (CML) defines equity release as the unlocking of some or all of the equity tied up in a property, with the finance generated not repaid out of income. The main market is the elderly homeowner looking to supplement lifestyle in later years.
The CML believes the growing number of elderly households means this market could grow by £5bn per annum. But it also points out this growth will not be achieved without the Government’s help such as age-related tax relief, ensuring enhanced income does not detract from State benefits and the establishment by the Financial Services Authority (FSA) of a proper regulatory regime, which are missing from the current market.
Without these conditions, the equity release market is highly specialist. The application process can be long-winded, involving not just the elderly homeowners, but also their family and an independent firm of solicitors able to give objective advice. A thorough review of the lenders in this market needs to be undertaken. You must be sure the money generated will achieve the chosen objective as if anything goes wrong the vulnerable elderly borrower will be deemed to have been mis-sold.