Whilst LV= broadly supports any proposal which improves the equity release market for consumers, the equity release market is quite different from the standard mortgage market and it is important that the FSA recognises the differences and tailors the proposed rules accordingly.
“Given the nature of lifetime mortgage products and how they are repaid, the majority of the proposals set out in the Mortgage Market Review there are several that do not apply to LV=’s equity release proposition.
The review mentions the need for an income affordability assessment to be carried out, however, unlike a convential mortgage, equity release products are designed for those approaching and beyond state retirement age and as a result income is not relevant to the repayment strategy.
In the case of the lifetime mortgage products that LV= offers, the loan is repaid when the customer dies, moves into long term care or sells the property and it is the property which is the repayment vehicle. As a SHIP member, LV=’s equity release customers are provided with a layer of protection in the form of a no negative equity guarantee which means that customers will never owe more than the price of their house. This insulates consumers from the negative effects of interest rate rises and house price inflation.
Treating the equity release market as a single market makes sense as IFAs will have to provide information about the various equity release products regardless of whether they offer them or not. This will benefit their clients as they will be able to make a more informed choice.
LV= is wholly supportive of the idea of fully advised sales, and as SHIP members, all our products are already sold with advice. Equity release can be a useful retirement solution, but it is important that equity release customers receive robust advice in order to ensure that they consider the product in terms of later life planning e.g inheritance tax planning and the potential need for long term care.”
Vanessa Owen is LV=’s head of equity release
