MIp19-20_1109.qxd 21/10/09 16:36 Page 4
20
Equity release Equity release
HRPs is clear. Lifetime mortgages are
sold on the basis that house prices
will continue to grow at
previously seen levels and
so the ‘carrot’ or reward
is the opportunity to
increase the value of
equity left to the
customer. At the
same time, and in
far too many
cases, the HRP is
either not
mentioned (as
evidenced by
the Which?
report) or
positively
rubbished by
advisers. The
reason given by
advisers for this
‘approach’ is that
the client does not
want to give up
‘ownership’ of their
property.
This argument is a
complete red herring. Apart
from the fact that the name on the
deeds (tangible deeds don’t actually exist
anymore) is changed, there is absolutely no
change in ownership and no real difference to
the experience of the HRP client compared to
that of a lifetime mortgage client. At the end
of the day clients of both HRPs and lifetime
mortgages are responsible for maintaining and
insuring the property. When the plan comes Certainty
to an end the property is sold by the provider With HRP there
and the value split between it and the estate or may be no potential
the client in accordance with the percentage ‘reward’ but there is
sold or value of the outstanding mortgage. certainty. If the client only
sells 50% they can be totally
Risk confident that at the end of the
The unimaginable risk with a lifetime plan they will have 50% left,
mortgage, that seems to be conveniently unless of course they sell more later
avoided by both advisers and providers alike, on. There is also the fact that the real
is that the clients could live a considerable needs for clients are likely to occur nearer the
time and at the end of the plan the cumulative end of the plan and the certainty of being able and way before they have listened to the
interest outstanding could have used all of the to come back and sell a little more near the client’s concerns and their attitude to risk.
equity up. Longevity and house price inflation end provides reassurance. Advisers would not Advisers must leave their ‘emotional
are the two major assumptions that this faith want to be taking calls from clients in several responses’ out of this process; while the
is built on and advisers should take care. The years time looking for more cash, only to find adviser may feel 100% comfortable in
adviser community is certainly not infallible that the interest has built up to a point where taking the risk that comes with a lifetime
and, as in the endowment episode, it has been there is no capacity to draw down anymore. mortgage, at the end of the day it is down
shown to get it wrong before. The point So the certainty offered by the HRP to the client. Are they truly happy with it
should therefore be made that the HRP, like a drawdown facility is worth something to both and have they really been provided with
capital and interest mortgage, is the ‘safe client and adviser. all the necessary information on all the
option’ – both the adviser and the client will Overall, when it comes to working with options available? Advisers have a real duty
know where they stand. In cases where there is potential equity release clients, advisers must of care to be well-versed and knowledgeable
no reason to suggest that the clients won’t live approach their client and the factfind about all the different product options
a full and long life (and this is only likely to objectively. Too many have set ideas and available; without being able to provide this,
get longer) the HRP should always be, at the misconceptions in place even before they have their service is, quite frankly, not worth
very least, a definite consideration. truly understood the client’s circumstances, having.
November 2009 Mortgage Introducer www.mortgageintroducer.com
Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32  |  Page 33  |  Page 34  |  Page 35  |  Page 36  |  Page 37  |  Page 38  |  Page 39  |  Page 40  |  Page 41  |  Page 42  |  Page 43  |  Page 44