Prudential predicts that the equity release borrowing requirement will double in the next two years, to £2 billion. Such will be the demand for these mortgages that the Joseph Rowntree Foundation is calling upon local authorities to provide them too. This, it says, might reassure older homeowners.
The last product that was given government endorsement was the SERPs opt-out pension and predictions are that this will be the next mis-selling scandal. I would counsel caution before going headlong into this field.
A recent review by the FSA highlighted that intermediaries and clients were choosing equity release without full and proper consideration of the consequences.
- Eligibility for means-tested benefits and grants are not being fully explored;
- Advisers are not fully exploring the impact of lifetime mortgages on a client’s future plans, such as ill health and long-term care.
Also, some advisers are not ‘facilitating discussions, which could enable customers to make informed decisions about whether a lifetime mortgage is right for them’.
My advice to brokers is to seek a second opinion on every case before making the final recommendation. This might be through ‘pre-approval’ by your mortgage network, or from an experienced, qualified associate. Checklists are not sufficient. The test of good advice is always in the understanding and acceptance by the client. Given the age range for this market, it’s worth testing the evidence and the sense of your recommendation. Is equity release the best solution for your customers’ current and future needs? And will their children be happy about it?
