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Fifth of equity release customers face down valuations on homes

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  • 06/01/2016
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Fifth of equity release customers face down valuations on homes
Up to a fifth of equity release customers receive lower than expected property valuations when taking out plans, research reveals.

Advisers say the issue of lower-than-expected valuations is increasing despite a rise in values of homes owned by customers, research by Bower Retirement Services’ Adviser Tracker Research shows.

Andrea Rozario, chief corporate officer at Bower Retirement Services, said one of the main reasons for this is customers over-estimating their property’s value.

“If somebody has been in a property for a long time and they haven’t moved in recent years, it can be hard to gauge what has happened to the average prices of properties.

“It’s almost a psychological thing – if you have an investment for years some people seem to think it’s worth more than it really is in the current market.”

Rozario said the difference in expected and real prices can come as a shock to customers when making the decision to access their property wealth.

She stressed the importance of speaking to a specialist adviser to see what the property is likely to be worth before initiating the equity release process, particularly as the average property value continues to rise.

Some of the advisers surveyed by Bower also state they have experienced under-valuations from surveyors.

Advisers expect the market to continue to grow in 2016, and Rozario said it is likely new products will become available.

She said she expects the market to continue to innovate in terms of funding mechanisms and products available.

“The Council of Mortgage Lenders and the Building Societies Association have expressed an interest in retirement lending space and I think that will help drive innovation and new product development,” Rozario said.

“The more providers we have got that produce products fit for the older generation, the more choice they’ve got. It will have an impact on the products already on the market as it will improve and increase competition.”

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