Equity release: Really the last resort?

Last week Which? warned homeowners heading to retirement to treat equity release as a "last resort", but providers of lifetime mortgages are now hitting back.

A Which? guide called for anyone considering equity release "to do so cautiously and only after exhausting other options".

It added independent, professional advice should always be sought.

However, the equity release industry has now struck back, claiming a lifetime mortgage – where all or part of the equity of a home is exchanged for a lump sum or regular income – is far from the last resort it once was.

Safe Home Income Plans (SHIP), the trade body for equity release, described Which? as being outdated.

"Equity release products offer increasing flexibility – there are now products that offer the security of fixed-rates with little or no redemption penalties, and recently we have seen rates falling, in stark comparison to the mainstream mortgage market," said Andrea Rozario, SHIP director general.

"Equity Release is most definitely not an option of last resort but a logical consideration for those considering how to fund their retirement," he said.
"It offers a guarantee that older people can stay in the homes they know and love, with no monthly rent and a no negative equity guarantee.

Meanwhile, Anthony Rafferty, at Norwich Union post retirement products, claimed equity release schemes offered many people the best route to improving their income and standard of living in retirement.

"The flexibility of these products has been growing rapidly over the last few years as more providers enter the market, while the costs of lifetime mortgages have been falling steadily over the past few years," he said.

Mr Rafferty did admit equity release was not right for every customer, but claimed neither was downsizing to a smaller home.

"The advice process that we offer our customers is robust and rigorous and we are committed to ensuring that all of our customers understand their options and the pros and cons of taking out an equity release plan," the Norwich Union representative said.

Alex Edmans, Saga business development manager, stood by the Which? claims highlighting the need for proper financial advice before committing to equity release.

"However, we disagree with their views that equity release should only be considered as an option of last resort," he said.

“Equity release gives consumers a choice. Most people would not want to be forced into the decision of having to move into a smaller property and equity release gives them the option and ability to remain in their own homes."

“With recent improvements, equity release products on the market offer greater flexibility and better value than ever before. Indeed, equity release interest rates that are fixed for life currently compare very favorably against the standard variable mortgage rates on the market at present.

“However, as Which? mentioned, equity release could reduce your entitlement to some state benefits. It is of the utmost importance to carry out a full check of any benefits you are receiving or could be entitled to before plans are arranged.

“With this in mind, equity release is not right for everyone and that is why it's important to seek financial advice before arranging an equity release plan. Our specialists always make sure that any plans arranged are in the customer’s best interest,” he concluded.