Industry welcomes equity release debate
Yesterday Christopher Woolard, the FCA’s director of strategy and competition, said there is a need for a “debate” on equity release to foster innovation to better serve later life customers.
He added that equity release has rightly or wrongly become a “dirty word” and said some people still argue that the cost of equity release products is too high.
Nigel Waterson, chairman of industry body the Equity Release Council, said: “The FCA is right to identify equity release as a tried and tested yet potentially untapped market in the UK and we welcome the intention to explore ways that it could help ease the financial constraints on an ageing population.
“Equity release offers one of the highest levels of consumer protection in financial services, through being one of the most tightly regulated sectors, protected for the past 24 years by its own rigorous code of product standards as well as FCA regulation requiring all consumers to take qualified advice.
“This regulation it could be argued, has constrained the sector’s growth by restricting the number of providers choosing to enter it but we believe that consumer protection is at the heart of meeting consumers’ needs so far and must remain paramount in all future considerations.”
Currently equity release providers which are members the Equity Release Council have to build fail safes into products such as a no negative equity guarantee, meaning some so-called regulation within the sector is self-imposed.
Dean Mirfin, managing director of wealth and retirement options at Key Retirement, called for the debate to look at self-regulation.
He said: “In a thriving environment you may say consumers should have a right to choose which options and protections are built into their products.
“If you are living in a half a million pound home and you only need to borrow £20,000 do you need a no negative equity guarantee? You may not want to pay for the risk of it eating up all of your equity because you don’t see that happening.
“If we do change the nature of products and clients are exposed to risk what’s important is how we deal with that.”
He added: “A lot has happened since 2004 in terms of flexibility, we’ve got rates as low as 5% so a lot has been achieved under the current framework. Can more be achieved if that’s reviewed?
“Regulatory framework about products and how they are sold should be reviewed on a regular basis.”
Others who welcomed a debate included Andrea Rozario, chief corporate officer of Bower Retirement and Jeremy Duncombe, director at Legal & General Mortgage Club.
Rozario said: “I’m interested to know what the FCA feels is holding back the market.
“From my perspective the most important thing is that they do consult and that they consult across the board from providers to advisers and solicitors so there is no room for misinterpretation and there is a clear understanding of what if anything needs to be done to move the industry forward.
“In terms of advising the customer we need to make sure we are extremely cautious, but product regulation is self-imposed as an industry which is why we need to have a very clear debate as there will be numerous views on this.”
Duncombe added: “Equity release will soon become an intrinsic part of future financial planning in the UK. Those who are asset rich but cash poor will increasingly be looking for new ways to release some of their money as they move into retirement. Any action the regulator can take to stimulate competition and broader participation in this market is therefore welcome.
“For those lenders looking to move into this sector, it is important they have the support and space they need to innovate. If we are to successfully serve an aging population, we need new ideas in the market to ensure individuals have access to the appropriate financial products for their specific needs.
“It is encouraging to see the FCA recognising the changing dynamics of the market, and tackling this challenge head-on.”