The programme Tonight with Trevor McDonald reported on cases where people had been sold equity release schemes and ended up with little left over. In one case, an elderly woman signed up for a plan that involved a small monthly income of £1 per month and a lump sum of £20,000 she handed over the deeds of the house 57 per cent of the future value of the home. After she died, the property had to be sold by her daughter to honour the contract, rather than her receiving any inheritance.
Another case highlighted a man who had taken out a shared appreciation mortgage nine years ago to borrow £20,000 for home improvements, but was now living in a mobile home. The deal involved the lender retaining up to 75 per cent of any future increase in the value of the property and as house prices increased, he sold for £185,000 with almost £100,000 going towards paying the loan.
Jon King, chief executive of Safe Home Income Plans (SHIP) the equity release trade body, commented: “It is extremely important that consumers realise that neither shared appreciation mortgages or sale and rent back schemes have anything to do with SHIP-approved equity release.
“It is vital that consumers realise that sale and rent back is not an equity release product. The key difference is that sale and rent back schemes provide virtually no protection to consumers whereas the equity release industry provides complete protection. In sale and rent back schemes, there is no security of tenure for the seller, who takes on a shorthold assured tenancy agreement. In addition, virtually none of the sale and rent back industry is regulated.”
Jayne Almond, chief executive officer of Stonehaven, said: “The problems associated with shared appreciation mortgages have been well documented and these schemes have been withdrawn. There are many dangers with taking out sale and rent back schemes, and we support the call for these products to be regulated.
“However, it is important to recognise that there are other equity release plans which are highly regulated and offer customers considerable protection.
While the programme mentioned this, we are concerned that many older home owners may be put off taking out equity release products, when in practice the SHIP approved plans are highly regulated.”
Dean Mirfin, business development director at Key Retirement Solutions, said: “We never recommended anyone take one of these plans out. Fortunately the equity release market has moved on hugely since then and it is now fully regulated, with transparent products available.
“Our biggest concern is that sale and rent back firms are marketing themselves as an equity release solution, and using scaremongering tactics to slam other regulated options, which shouldn’t be allowed to continue as it will confuse consumers.
“We urge anyone that is thinking of releasing the cash from their home to seek specialist independent advice.”
get the daily news delivered to your inbox
register for the next forum
find the latest industry jobs
