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Rozario responds to Andrew Castle’s attack on equity release

by: Andrea Rozario, chief corporate officer, Bower Retirement Services
  • 10/08/2015
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Rozario responds to Andrew Castle’s attack on equity release
Andrea Rozario responds to Andrew Castle's warning to consumers that equity release products 'take advantage' of older and vulnerable customers, which also criticised product elements of the loans as 'foul'.

How very sad it was to read Andrew Castle’s outburst in the Sunday Times (paywall) and again in the Mail Online regarding the situation of his parents-in-law after taking out what appears to be an equity release plan. His words were stinging and harmful to the reputation of our industry after years of hard work by numerous people, strict regulation and extensive safeguards. His vilification of equity release was extremely harsh and as an industry I feel we have a right of reply.

I can understand the feelings of Mr Castle and his wife but there needs to be some context to this story.

No reasonable person would usually expect to borrow money with no repayments or charges. But very often, the whole point of equity release is that the customer cannot afford monthly repayments or does not wish to make them. It is this fundamental feature that often meets a customer’s needs, together with the release of the equity tied up in their property. If interest is not paid each month it is obviously compounded, just as it is when paid on savings. This would have been made very clear in the paperwork and advice process.

The issue here, according to Mr Castle, is the early redemption charge along with the compound interest. As mentioned, if no monthly repayments are made then the interest will still be charged and compounded. The paperwork would explain what the loan will accrue to each year. According to the Financial Ombudsman all charges were made quite clear. How these products are funded and structured is very different to standard mortgages.  Customers need to understand these charges exist and how it will affect them.

‘Poor impression’

The article goes on to state that the company the parents-in-law used was no longer in business. This conveys a poor impression of our industry. It was not stated whether the company was in fact the advisory firm or the provider or whether Mr Castle and his wife were aware of her parents’ decision to take equity release. But it did at least say the complaint was not upheld.

As an industry all advisers are expected to – and do – understand the importance of including the wider family in the advice process but ultimately this choice is the customer’s. It would appear that for whatever reason, neither Mr Castle nor his wife was included in this process. This is unusual. In most cases the wider family are very much involved and are aware of what is happening generally at the behest of the customer.

The safeguards laid down by the equity release industry are comprehensive and the right to move to another suitable property is one of the requirements of all providers who subscribe to the Equity Release Council, along with a no negative equity guarantee, which covers all lenders.

Both of the articles featuring Mr Castle portray a very poor image of an industry that has taken massive steps to ensure the customer is protected and fully aware of the nature of the contract they are entering into, which includes the need for independent legal advice, which these customers also had. Without the option of releasing equity with no need to make monthly repayments, many people would be suffering a poorer standard of living while residing in their biggest asset.

The long-term nature of these products is made very clear during the advice process, along with the costs and the impact on the estate. Every effort is made to ensure customers are fully informed, have explored all other avenues and are aware of the nature of the contract. Vilifying and demonising an industry that actually provides an essential option for many is irresponsible and unhelpful. Ultimately, it is the customers who lose out when, out of fear, they are deterred from using equity release when it is the only option for many of them.

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