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No, minister: equity release must avoid govt interference – Simon Chalk

by: Simon Chalk
  • 27/06/2014
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No, minister: equity release must avoid govt interference – Simon Chalk
It has been suggested by one adviser in the equity release market that the government could provide the ‘no-negative equity guarantee’ which is believed by many to an essential cornerstone in consumer protection.

I would vociferously argue the last thing a rapidly improving equity release marketplace needs; is the government to supply something which a free market already does very well. Such things do not come with an open cheque book and the degree of control over pricing, valuations, underwriting of plans and even distribution the government would inevitably insist upon, would have the opposite effect of stifling innovation and enterprise.

The cost of a no-negative equity guarantee has often been quoted as crudely adding 1% to the fixed interest rates on lifetime mortgages. If we really think losing this one element of the overall cost (involved in taking a plan), will lead to any discernible increase in take up, then we are rather clutching at straws.

Neither would it prove to be a popular move with the majority of the electorate. Imagine explaining to the 20 and 30 some-things, already priced out of buying property, that part of their tax payments will go to support the older population of ‘wealthy homeowners’ to keep and enjoy theirs.

Resentment amongst the younger generation over the older generations seemingly having it all is already brewing and doesn’t need stoking further. Suggesting to those older generations it might be a good idea to pass some housing equity down the line whilst they are alive, is a much more palatable message and offers significantly greater economic rewards all round than a mere 1% rate fall would ever achieve.

In short, allowing government to interfere this way in a competitive and healthily functioning sector would be completely unwelcome.

What would be helpful mind, is to have more favourable outcomes for customers who are eligible for means-tested benefits, but as we’ve been pushing on that locked door for well over a decade now, I wouldn’t hold my breath if I were you.

The government by now recognise the wealth of the great majority is held in housing, and the equity release sector can provide access to that, so all is needed is really startlingly obvious; to ensure equity release is automatically included as one option, in the guidance promised to 400,000 retirees each year from April 2015 and beyond.

We have a fantastic, safe product that is unequalled by any other. All we need is promotion and awareness of what a difference it can make to your life.

Simon Chalk is equity release technical manager at Age Partnership

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