How do you define ‘equity release’?
It appears that any review or discussion of the ‘equity release’ market must, at its outset, clarify just what is meant by the term.
This might seem an odd opening gambit but it is completely necessary given the varying use of the term.
I have heard many commentators and respected speakers use the term ‘equity release’ in different ways but one wonders what the impact on consumer understanding is when we have this inconsistency of message?
As increased consumer awareness and education about the products and the solutions equity release provides is absolutely key to the sustainable growth of the market itself this could be a fundamental issue.
If the very industry itself, those that work within the sector and offer the products, can’t be consistent and accurate, what hope is there for the consumer?
You might think I am joking but I’m not – I have been to a number of sessions where those who are at the forefront in terms of the industry and dealing with customers are either, at best, unclear in terms of the sector terminology, or at worst misleading through poor communication.
The industry needs to get its own house in order because we are now seeing confusion filtering into high-profile media comment.
This is particularly damaging given the uphill battle we already have to highlight and educate on equity release.
Evidence of this came recently via the ubiquitous Martin Lewis and his e-mail newsletter sent to his many thousands of subscribers through the MoneySavingExpert site.
In it he wrote about ‘Equity Release’ because, he said, he is often asked about the subject although bizarrely, he does not carry any permanent information on the site about it.
Unfortunately, the newsletter information provided was less than comprehensive.
Not only did it suggest that the only equity release products which exist are lifetime mortgages, completely ignoring home reversions, it also suggested that consumers should visit a mortgage adviser.
So not only is the newsletter dangerously inaccurate, it is also extremely unhelpful to the consumer as most mortgage advisers would not be able to advise on equity release.
There was also no mention of sites, or information sources, where specialist equity release advice could and should be accessed.
Although many advisers are not enamoured of Lewis’ content or style, the fact remains that he has a sizeable reach amongst consumers and so it is important that the facts are right.
When it comes to equity release particularly, the target customer market have the time to read this ‘stuff’ so misleading statements have the potential to cause significant damage.
Following the e-mail, Bridgewater via SHIP contacted Lewis with the suggestion that an equity release information hub could be set up on his site.
SHIP offered to bring the necessary expertise together to help produce the information to cover all parts of the equity release market and deliver full information and education about the sector and its products.
This offer has, to date, not been taken up as equity release is “not a key subject” for MoneySavingExpert despite the fact that many ‘Money Savers’ contact Lewis about it.
The sector gets more than its fair share of such articles and comment which are alarming in their lack of balance and accuracy and completely unhelpful to all good advisers.
Society has a tendency to believe what they read in the media and through the likes of Lewis, even though they are not remotely qualified to comment and seem to show little interest in learning the real facts.
This puts an even greater pressure and responsibility on those who work within the sector to present a consistent, accurate picture and should focus the mind of those communicating to consumers and the media - how do we properly communicate the balanced key messages we want consumers to take away with them?
We, the whole industry, certainly do not think that equity release only equals lifetime mortgages as Lewis outlined, so it is perhaps time to rethink our use of the term ‘equity release’ to ensure this is reflected properly.
And as there is obviously a great deal of confusion around this term, the adviser/provider industry must take responsibility for its clarification.
So where to start with clarity when even the expression itself doesn’t know what it is - in dictionary terms ‘equity’ is a noun and ‘release’ is a verb or a noun.
The Council of Mortgage Lenders has recognised the potential confusion that arises with the use of the term ‘equity release’ and refers to ‘mortgage equity withdrawal’ and ‘equity release schemes’ to differentiate between the action by customers to draw equity from their property using their mortgage i.e. through further advances on mortgages and the equity release products designed for older homeowners.
So in terms of the products available for older customers the industry should follow suit - the term ‘equity release’ should only be used to describe the whole of the market, that is both lifetime mortgages and home reversion plans.
Equity release is not one or the other although certain individuals might suggest it is so.
We might suggest that it is a matter of habit that has arisen simply because the term ‘equity release’ was first introduced when lifetime mortgages were regulated by the FSA back in 2004.
Back then, lifetime mortgages were the only regulated ‘equity release’ product but this has now changed.
With the regulation of home reversions commentators and advisers needed to re-train themselves to recognise that the equity release market is more than lifetime mortgages.
This may all seem like a pedantic point but the ‘devil is in the detail’ is a truism; it is details like this that cause confusion and suspicion amongst consumers.
Plus if the market itself is getting it wrong then this will undoubtedly mean further contagion throughout which will be even more difficult to keep in check.
So, this focus on getting the terminology right should start with those who work within the sector.
After all, if the professionals practicing in the equity release market cannot get it right then we cannot expect ‘Money Saving Experts’ or our potential customers to have a hope of understanding it either.
