This decision follows the Treasury’s full public consultation.
The Treasury has announced that it will consult shortly on the definition of home reversion plans for the forthcoming legislation. When the scope of regulation has been defined the FSA will then consult on the details and rules of the regulatory regime. MCCB has campaigned for this regulatory loophole to be closed and to bring home reversionary schemes (where consumers transfer the ownership of all or part of their
home to an equity release provider in return for an advance and a lifelong lease) under the same regulatory requirements as those for lifetime mortgages. MCCB argued that reversionary schemes had the same impact on consumers as lifetime mortgages with the added disbenefit of surrendering legal ownership of the home as part of the equity release arrangements.
Equity release mortgage-based schemes (known as lifetime mortgages) do not involve the surrender of ownership and currently fall within the remit of the non-statutory Mortgage
Code and are regulated by MCCB. Lifetime mortgages already fall under the defined scope of statutory mortgage regulation under the FSA, to be implemented on 31 October 2004.
The market for lifetime mortgages and home reversionary schemes is likely to grow very significantly in the next few years.
Commenting on the announcement, Luke March, Chief Executive of MCCB said: “This is a logical and sensible progression of regulation and a good result for future consumers. We are pleased to have played our part in persuading the Treasury of the need to act in this area.
Both lifetime mortgages and home reversionary schemes involve consumers’ most valuable asset and it is reasonable to expect there to be similar enforceable rules in place regarding the promotion, sale and administration of such products. This will create a fair and level playing field for both providers and potential purchasers of all equity release products.”
