How safe is equity release?
Equity Release Supermarket understand that taking a release of equity from your property is a big decision. Afterall, you have built up considerable wealth in your property and want to ensure it’s protected and safe for your beneficiaries. Therefore, it’s important you receive the best possible advice from an equity release specialist.Equity release schemes come with a ‘mandatory advice’ tag. This has been forced on the industry, not just by the FCA, but also by it’s own internal regulatory trade body – the Equity Release Council. These authorities have been instrumental in helping build a solid foundation and improving the reputation of equity release schemes which had a tainted past. Recognising this age group as potentially vulnerable and the implications that equity release can have on a homeowners estate, was important for the industry to then implement it’s own code of conduct.
Will I Lose My Home?No. All equity release schemes from members of the Equity Release Council provide the guaranteed right to remain in the property for the rest of your life. This will continue until the last survivor has died or moved into care. Therefore, with a lifetime mortgage as long as the property remains your main residence and you keep to the terms of the mortgage deed, then the house will remain 100% in your name. For home reversion plans the same guaranteed right to lifetime tenancy applies, but ownership only applies to the remaining unsold portion.
Who Regulates the Equity Release Industry?It was 1991 when self-regulation of equity release came into force. At this point the industry became more accountable and formed it’s own trade body called ‘SHIP’ (Safe Home Income Plans) whose members were just the equity release providers. This has now been superceded by the Equity Release Council who opened membership to all parties involved in equity release including advisers, solicitors and lenders. An even bigger impact was made in 2004 when the lifetime mortgage market became fully regulated by the equivalent of today’s Financial Conduct Authority. In addition, this regulation was then also rolled out to encompass home reversion schemes in 2007.
How Each Party Complies to Equity Release StandardsThere are five parties involved in the whole equity release process and each has laid down and abides by a set of rules and principles. By every sector involved adhering, ensures the industry remains as tightly regulated as possible. Here we explain the roles and responsibilities each party plays in providing a safer equity release:-
- Financial Conduct Authority Act as overseer in safe practices for the whole financial services industry. By encompassing both lifetime mortgages and home reversions, all companies involved in these regulated products are ultimately responsible and reportable to the Financial Conduct Authority. Part of the FCA’s service includes a consumer complaints system where potential redress can be sought via the Financial Ombudsman The Financial Ombudsman Service (FOS) is an agency for arbitrating of unresolved complaints between regulated firms and their clients. Full details of the FOS can be found at www.financial-ombudsman.org.uk.
- The Equity Release Council Formerly SHIP and currently headed by chairman David Burrowes, the ERC provides an industry ‘statement of principles’ which sets the rules by which advisers, lenders and solicitors voluntarily follow. These SHIP Standards offer consumer protection safeguards including no-negative equity guarantee, the ability to move house & transfer the equity release mortgage, permanent residential occupation and a fixed lifetime, or upper-capped variable interest rate. The Equity Release Council has now passed the 25 year milestone, during which time it’s help build a stronger reputation, from which the industry is now benefitting.
- Solicitors & Licensed Conveyancers
- Equity Release Advisers
- Equity Release Providers