In the report, which names five types of financial product targeted at the over-50s, Which? said some of these specialist products were a “rip-off” in comparison to mainstream alternatives.
Included in the February 2015 issue of its magazine, the report named Aviva, Hodge Lifetime and Stonehaven as having early repayment charges of up to 25%.
It compared interest rates for equity release at between 5.89% and 7.75% as being “much higher” than standard mortgage rates for 10-year deals which are around 4%.
The report compared the varying cost of equity release with the LV lump sum plan being named as least expensive at £216,066 and More 2 Life’s enhanced deal at £273,357 the most expensive, a difference of 57,291.
Which? advised consumers to explore all the mainstream lending routes before considering an equity release scheme, including secured/unsecured loans for smaller amounts and extending a mortgage.
However, Institute of Financial Services special adviser Phil Hall said while the report was carried out with the best intentions, much of it compared “apples and pears”.
“For example, many older people are likely to be refused a standard mortgage so comparisons can be pretty meaningless. Furthermore, with equity release products the mortgage rate is fixed for a lifetime unlike a standard mortgage which is variable, fixed for a year or two, or ten at most,” he explained.
Hall said consumers should pursue advice from advisers instead of relying on information in the Which? report.
“The best thing for any member of the public to do is seek professional advice from a qualified adviser who holds a relevant FCA approved qualification such as the Certificate in Regulated Equity Release (CeRER®). This will ensure they receive clear and professional advice about whether or not equity release is the right step to take.”
Writing for Mortgage Solutions, Bower Retirement Services chief corporate officer Andrea Rozario also hit back at Which? in defence of equity release, explaining that the consumer body was often guilty of an unbalanced approach when reviewing the product.
