Equity release schemes have been around in some format since the 1960’s. However, they have undergone significant changes to ensure that today’s equity release mortgages are complaint & trustworthy in the eyes of the over 55 marketplace.
The first steps towards recognition of the need for consumer protection came in 1991 with the launch of SHIP (Safe Home Income Plan). SHIP brought about a voluntary code of practice that must be implemented within any equity release scheme in order to achieve SHIP status: –
- The flexibility to still be able to move house. Therefore the equity release plan must be portable
- You can repay the equity release mortgage at any time, subject to potential early repayment charges
- All plans must have the inclusion of a ‘no-negative equity guarantee‘ option
The no-negative equity guarantee provides the protection in an ‘over’ roll-up situation, where the equity release balance supercedes the value of the property in the future.
If this does occur the lender will invoke the no-negative equity guarantee and only ask for the property value on eventual sale. This provides the reassurance that no debt can be transferred onto the beneficiaries.
Since then, the FSA (Financial Services Authority) has become involved in the equity release market & taken all schemes under its wing.
Therefore in 2004, lifetime mortgages became fully regulated by the FSA & provided greater consumer protection. This led to only qualified equity release advisers being able provide recommendations to the general public.
Three years later in 2007, home reversions plans were amalgamated with lifetime mortgages resulting in both types of plans becoming regulated by the FSA.
With recent developments in the industry & SHIP now reforming itself into the Equity Release Council to have a stronger presence & stance within the post retirement market, then greater changes are to follow. This in turn will lead to greater consumer awareness of equity release schemes & their benefits to the over 55’s.