Equity release considerations.

With flexible drawdown options and plans sold exclusively through intermediaries, Hodge Equity Release warns of the threat redemption penalties could have upon the industry if intermediaries don’t consider them in their advice to clients.

Jon King, MD of Hodge Equity Release commented, “The growth seen in SHIP members’ business between Q1 and Q2 2008 is encouraging and highlights the unfaltering popularity of drawdown products and the domination of the intermediary channel for distribution. However, to ensure this momentum continues, we are concerned that advice surrounding these plans needs to adapt.

“Traditional mortgage advice has centred on affordability, plus the method and timing of repayment. Equity release, on the other hand, requires advisers to help clients minimise the eventual repayment and thus future review meetings should inevitably review the option of remortgaging. With this in mind, redemption penalties therefore form a vital element of the advice process.

“The importance of flexibility for equity release planning does not stop at considerations for drawdown products, clients also want flexibility to move their plan if circumstances change; including any movement in future interest rates. In order to achieve this, advisers must be in a position to make clients aware of all penalties that could affect their decision.”.