Customers come first in equity release reforms

THE equity release industry has fought hard to clean up its act and make itself consumer-friendly. It has made a good job of it, although the cleaning-up is far from finished.

Equity release is aimed at the over-55s who want to extract cash from the value of their home

(asset rich, income poor). It involves the taking-out of a fixedrate, interest-only mortgage, but unlike a conventional home loan, interest is rolled up into the debt rather than paid by the customer every month. The loan is cleared by the sale of the home when the planholder dies or goes into care – with the equity release provider guaranteeing to take the hit if there is any negative equity.

Though plans now allow partial payments of interest to be made – mitigating the impact of rolled-up interest increasing the size of the outstanding loan – equity release customers need particular looking after. The Equity Release Council, the industry’s trade association, acknowledges this. It has just reminded plan providers and equity release advisers of their lifetime responsibilities to customers.

With new consumer duty rules being introduced across the financial services industry by the City regulator, the council is keen to ensure its industry meets them.

So it wants customers to be treated royally from the time they buy a plan through to when they die – with key information made available at key moments in their equity release journey. For example, this should happen when a loved one dies, leaving a surviving partner with a plan that maybe they don’t understand. I trust plan providers and advisers take on board what the council says. Customers must come first.