The CML is concerned about the price advantage home reversion schemes may appear to have over lifetime mortgages and asserts that failure to regulate them could result in a skewed equity release market.
Home reversion schemes or part reversion plans allow those over a certain age – usually 55 – to sell all or part of their homes to a lender and live in the property until death. The proportion of the property sold reverts to the reversion company when the owners die.
However, the CML said in its response to the Treasury’s consultation on home reversion plans the risk is that if home reversion schemes are left unregulated, it will leave a loophole when the rest of the equity release market is regulated by the FSA in October 2004.
Jackie Bennett, CML senior policy adviser, commented: “Failure to regulate reversion schemes would cause confusion in the equity release market. It would also deny reversion scheme customers access to the Financial Ombudsman Service or the Financial Services Compensation Scheme if things go wrong. Given the sensitive nature of the equity release market, it is essential that the Treasury put in place robust consumer protection measures to bring reversion schemes into line with lifetime mortgages.”
The CML believes that, given the huge impact that equity release can have on older people’s finances, it is essential that the regulatory system does not distort their choices by inadvertently creating advantages for home reversion schemes over lifetime mortgages.
