MIp29_equity news.qxd 27/2/09 11:25 Page 7
Equity release news
31
Debate
Sale and rent back
at House
regulation is "positive
of Lords
step"
Peers, consumer organisations,
charities and equity release
The Financial Services rent back market, Dean Mirfin, best option for them - numer-
providers joined together last
Authority's proposals to regulate director of Key Retirement ous tenants have being evicted
month at the House of Lords
sale and rent back schemes is Solutions, said: "The news that as they are unable to afford the
to debate the future of
good news for consumers, the government has requested
equity release in retirement
according to most in the equity the regulation of the sale and circle6
rent agreed
Lack of security for con-
planning and the role of Safe
release sector. rent back sector is welcome news sumers - landlords imposing
Home Income Plans (SHIP),
According to a recent survey for consumers. huge rent hikes resulting in
the trade body representing
by equity release provider Hodge "The FSA's consultation paper tenants losing their homes
over 90% of the equity release
Lifetime, 52 per cent of IFAs say proposes a two stage approach when they then default on
sector.
equity release is being confused which includes an interim regime
Organisations such as the
with sale and rent back, which is to be bought in from July, this circle6
their payments
Consumers not receiving
OFT, FSA and HM Treasury
obviously a very different type of will address the most significant advice on the other options
debated the key challenges
scheme, and an area that is cur- problems facing consumers that available to them including:
which need to be addressed in
rently unregulated – unlike equi- came to light following the OFT's negotiations with their current
order to achieve a more signifi-
ty release. st
cant use of safe equity release.
circle6
udy into the sector: mortgage provider, selling on
Commenting on the FSA's Some consumers entering into the open market, or for older
This debate initiated a policy
consultation paper on the pro- sale and rent back transactions home owners using a regulated
consultation process which will
posed regulation of the sale and when this is not necessarily the equity release product.”
result in the publishing of a
SHIP White Paper in Summer
2009.
The key themes debated were: Demand for equity
circle6 Lack of consumer knowledge
circle6
and understanding
Definition of the ‘equity
release will grow
circle6
release industry'
How to combat the historically
The equity release market is like- 24.1 years. The Government's that there will soon be an
circle6
negative reputation
ly to grow as life expectancy and current state pension age is 65 increase in demand.
Lack of developed distribu-
the need for extra funding for a man and 60 for a woman, Commenting, chartered finan-
circle6
tion channels
increases over the next few years, which means that a man who cial planner at
Attitude of Government policy
according to turned 60 in 2006 could be in
Fairinvestment.co.uk Sharon
circle6
towards retirement funding
Fairinvestment.co.uk retirement for an average of 16 Bratley, said: "The fact that life
Confusion with unregulated
Life expectancy in the UK has years, while a woman who also expectancy is increasing and the
products (e.g. SARB)
been extended by an average of turned 60 in 2006 could be in prospect of a longer retirement
20 per cent in 20 years – in fact retirement for an average of 24 should be a cause for celebration,
Baroness Hollis, speaking at
life expectancy has increased by years. but many people will still worry
the event, commented: “It is
26 per cent for men and 14 per Equity release is one option about how they are going to
distressing to see people unable
cent for women over the past 20 open to homeowners of retire- afford to live during their retire-
to finance the retirement they
years. This means longer retire- ment age, and is currently under ment.
need, while they are hanging
ments, which require more fund- discussion by industry experts, "Reduced income in retire-
onto an asset they could use.
ing, making alternative capital Government and consumer bod- ment could mean that taking
People don't always understand
raising like equity release an ies, due to the potential it has to advantage of the equity built up
longevity, and that they may
option for property rich cash contribute towards funding in the property could become a
have 30 years in retirement.
poor Brits. retirement, providing it is safe real consideration for many.
Safe equity release could help
According to the Office for and SHIP (Safe Home Income Essentially, ensuring that the
them stay in their own homes
National Statistics (ONS), a man Plan) regulated. mortgage gets paid means that
for longer. We need to see
who turned 60 in 2006 is now In fact, it has been predicted not only will homeowners retain
pensions and housing together
expected to live for a further that by 2016, 42 per cent of the a good credit record, but the
as a continuum of assets to be
21.1 years, while a woman population of England and Wales option of equity release will be
used both before and after
who also turned 60 in 2006 is will be eligible to take out an available to them in retirement
retirement."
expected to live for a further equity release plan, suggesting should they need it."
www.mortgageintroducer.com March 2009 Mortgage Introducer
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