For many retirees, their home is likely to be their biggest asset so, perhaps unsurprisingly, equity release plans have become an increasingly popular way to release some of the capital locked up in a home.
According to the Equity Release Council (formerly Safe Home Income Plans or ‘SHIP’ ), mounting interest in equity release plans led to an annualised rise of 12 per cent in the total value of plans agreed during the first six months of 2013.
Demand for equity release plans has surged and the industry is tipped to surpass an annual value of £1 billion for the first time in five years during 2013.
It is vital to take expert advice before taking out equity release as some plans do not necessarily provide good value.
It is also important not to confuse equity release plans with ‘sale-and-rent-back’ arrangements, in which the house is sold – often at a discount – to a third party and then rented back to the vendor for a specified period. These arrangements tend to be an action of last resort, involving those in serious financial difficulties.
An equity release plan does not involve the sale of the house and the individual has the right to remain in their home for life.
In a drive to support consumers, the Equity Release Council has launched new measures designed to make sure individuals receive the very best advice and service. Equity release plan providers have to provide every customer with a report that clearly demonstrates why a particular product has been recommended for them. Providers also have to ensure every customer has access to a copy of the Council’s Code of Conduct.
The Code was set up in 1991 and is intended to ensure providers act in the best interests of consumers.
It gives consumers the right to use their property as their main residence for life and guarantees they will never owe more than the value of their home.
It ensures they receive a comprehensive and clear presentation of their equity release plan – including costs – and confirms the right to legal advice.
More recently, the code has been expanded to include a condition that independent legal advice has to be provided face-to-face by a qualified professional in order to ensure consumers understand the terms of any loan they decide to take out.