7m Households To Use Equity Release
New research reveals that as many as seven million homeowners intend to use equity release products to fund their retirement.
A poll by Motley Fool reveals that two out of seven homeowners are planning to release equity from their homes to help fund their retirement, with over half admitting their pension provision will be insufficient to cover retirement plans.
Such is the perceived confidence in property that a quarter of those polled said they were seeing rising house prices as a reason for a reduction in pension contributions.
David Kuo, head of personal finance at Motley Fool, said: "Given the housing boom of the last few years it's not surprising that some people have turned their backs on traditional pensions and focused instead on the value of their homes."
In the second quarter of 2007 the total number of new equity release plans by members of the UK equity release industry body, Safe Home Income Plans (Ship), rose 16 per cent to £302.3 million. Over the last 12 months £1.2 billion of equity plans have been sold.
Ship also noted the growth in demand for drawdown plans that allow homeowners to take funds as and when they need.
Much of the increased confidence in equity release schemes of late has come from changes to the way the industry is regulated.
From April this year all equity release schemes and home reversion plans fell under the jurisdiction of the Financial Services Authority (FSA).
The FSA is now pushing for equity release advisors to be experts in the field of equity release and not those who "dabble".
An FSA spokesman said: "We don't like advisors who dabble. The only people we want to advise are ¦ mortgage brokers who know, or financial advisors who know, the risks involved with the equity release market.
"Unless they are properly trained, they should either get fully trained, or leave the market altogether. That's one of our strong messages."
He went on to explain the rules that surround equity release: "All those things that apply to normal mortgages apply to equity release. It's based on our general mortgage rules requiring fair treatment of the customer and proper advice ¦ but with extra special protection built in to take account of the vulnerability of the market here.
"[Equity release applicants] are in a position where, if it goes wrong, there is not much they can do about it."
He added: "For a mortgage¦ that goes wrong for somebody in their thirties, that's very unfortunate, but they may have thirty or thirty five years of economic activity, earning or employment to work their way out of the losses that have been made. If you're seventy three and you've been retired for eight years, you're very unlikely to have that same option, which is another reason for that added security that we try and build in for equity release."