The main problem for equity release providers is that this form of remortgaging is not equity release at all, as the Financial Services Authority (FSA) only regulates on ‘true’ equity release products in home reversion plans and lifetime mortgages.
Although I am very glad to see the likes of the Council of Mortgage Lenders, Citizens Advice and Shelter joining calls for such schemes to be regulated, there needs to be education to the public on how they work and what they should be wary of.
Anyone who has watched daytime television and seen the soft focus and ‘comfy’ adverts that these firms use can be easily drawn in, and that is where education needs to begin.
Perhaps the biggest scandal in sale and rent back schemes is that homes are bought for only 60 per cent of market value, so those who use this as a means of releasing equity are losing out from the start.
As long as the likes of Shelter campaign for understanding and MI stands up for what is right in equity release, I believe the message will get through. For the moment, the onus lies with advisers to instruct correctly and ensure that those who take out schemes know what they are doing and the financial implications involved.
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