News Review: Equity Release


Equity release can complement downsizing by


Andrea Rozario, director general of SHIP


Following a quiet august, the financial services sector has woken up in September and we have seen a plethora of launches, controversial statements and government reports in the mortgage industry. the equity release industry has also seen some interesting – if less dramatic - developments. i believe that the industry


needs to be flexible and evolve with customer needs rather than remain static. a prime example of this is the launch of LV=’s flexible lending policy which means that cases which once might have been automatically rejected are now considered. indeed, sheltered accommodation properties or unusual ones in exceptional condition will now be individually underwritten and their owners may be able to benefit from access to their housing equity. more2Life has also made


some changes to its products and its enhanced Plus product now offers drawdown and lump sum options with the additional benefit of the lender’s protected equity guarantee which enables them to protect inheritances for family. all these are welcome moves and means that customers have more flexible products to choose from. it is good to see that


Freemans grattan Holdings – one of the uK’s leading


mail order companies – has signed a strategic partnership with Key retirement Solutions. Key will provide Freemans grattan’s extensive database of over-55 catalogue customers with access to services such as equity release, annuities and will writing. this is excellent news for providers as any new initiatives to grow the market will benefit the sector as a whole.


Endowment opportunity one other area that Partnership and Just retirement have highlighted as a potential source of growth is the endowment market. a significant number of people are heading towards retirement with a mortgage that their underperforming endowment will simply not cover. one of the ways in which this cost can be met is to use equity release to cover the outstanding balance. it is obviously not an


option for everyone but with the aviva real retirement report highlighting that the median savings of the typical pre-retiree (55 – 64 years old) is just £5,967 - it is an option that many will need to explore. While most people should consider how they can use their housing equity as part of their retirement planning, not all options are considered equally and downsizing is often pushed as the healthy alternative to equity release.


Downsizing However, a review by SHiP of 25 local authorities with a high density of over-55s shows that in almost a third


26 mortgage introducer OCTOBER 2011


“Downsizing and equity release are not mutu- ally exclusive. For some people both of these options when used together can help to make their retire- ments far more comfortable and stress free”


(32%) of cases, people looking at downsizing would either be worse off or not able to release sufficient money to make it worth while - when all costs were taken into account. indeed, those in Herefordshire (-£42,949), Poole (-£39,725) and Worcestershire (-£32,270) would find that downsizing left them significantly out of pocket. one message that SHiP


and indeed its members have been trying to get to the market is that downsizing and equity release are not mutually exclusive. For some people, both of these options, when used together can help to make their retirements far more comfortable and stress free.


Fact find SHiP’s members naturally actively work to ensure that


the process of giving and receiving advice on these products is as simple and as easy as possible. one recent step in the right direction is the recent introduction by Bridgewater of a new client checklist for inclusion in all its application forms. it is designed to help


clients and their advisers pull together all the necessary documentation for the application to complete as quickly as possible and to ensure that the client is able to meet any legal enquiries that may result from the application. So as you can see while


the equity release sector has perhaps not had the excitement the banking industry has seen with the Vickers review or the debate experienced by the mortgage industry engendered by the return of 100% LtV deals - it has certainly not been quiet. So what do the next few months hold?


Future SHiP will continue to work to promote equity release as a retirement planning tool to a variety of audiences including consumers and the government. We will also continue reviewing the cross-industry appetite for a broad representative body embracing all the major players in the equity release market. this is, as expected, a


lengthy process but we do anticipate that we will have progress to report before the end of 2011 and – to be frank – this process it too important for the industry to be rushed. So watch this space.


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