The introduction of regulation means older consumers wanting to release equity in their homes through a home reversion plan (HR) will enjoy these protections as will consumers wanting to buy their homes in a way that complies with Islamic law through a home purchase plan (HPP).
Dan Waters, FSA director of retail policy, said: "Regulation of these products represents an important step in the regulation of housing finance. It allows the FSA to deliver a level playing field by extending consumer protection over both sectors of the equity release market. In the case of HPPs it also builds on the work we have already done to improve consumer access to Islamic financial services. We are also working to promote wider public understanding of both these products as part of our consumer education objective."
HRs are a type of equity release product – these are generally aimed at older homeowners and are designed to enable them to benefit from the value of their homes without having to move out of them. The FSA already regulates the other main type of equity release product, lifetime mortgages. HPPs are structured as one method of financing the purchase of a home that is acceptable under Islamic law. The other is the Murabaha method, already regulated under the FSA’s mortgage regime.
Key features of the regime are:
- firms offering HRs and HPPs must be fit and proper and appropriately resourced with staff competent to undertake this business;
- consumers should get clear, concise and consistent information about a firm's services and products on offer (including appropriate risk warnings) so they can make informed choices;
- consumers should get good quality advice and be sold suitable products which take account of their circumstances and needs;
- if things go wrong, consumers are able to obtain redress, if appropriate.
