FSA reveals equity release regulation plans
19 December 2011
The Financial Services Authority (FSA) has announced plans to change the way the equity release market in the UK is regulated.
It revealed it is planning to implement a single equity release market by bringing lifetime mortgages and home reversion plans - currently seen as two separate industries - into one.
In its final Mortgage Market Review paper CP11/31, the FSA noted these should be seen as substitutable products, rather than niche options in their own right, reports Mortgage Solutions.
"This will mean that, under our disclosure proposals, intermediaries must explain to consumers that their service is restricted if they only offer one of these product types," said the FSA.
Descriptions from providers
While equity release providers will not have to alter their current plans under the changes to regulations announced by the body, it will impact on how they are able to describe the scope of their offerings to potential clients.
Labels such as 'independent', 'limited', 'single' or 'whole of market' would be replaced under the terms of the amendments being proposed by the FSA.
Lifetime mortgages providers would instead be told to use 'independent' and 'restricted' as ways to describe their products, as this would be in line with the approach adopted by the Retail Distribution Review.
It was noted by the FSA this is set to make the equity release sector less confusing for customers, as well as clarifying the rules for providers of the schemes and plans.
The FSA added: "Treating equity release as a single market will have the effect that intermediaries offering only lifetime mortgages or only home reversion plans will need to explain to consumers that their service is limited and describe the limitation in terms of the wider equity release market."
Lorreine Kennedy, founder of Carematters-uk.com, recently claimed people in their early 70s are increasingly considering equity release as a way to raise funds so they are able to continue enjoying life in the manner they have become accustomed to.
She explained individuals have seen their savings erode in the last few years as a result of record low interest rates of 0.5 per cent, which have been in effect since March 2009.
People wishing to find out more about releasing money from the value of their home could use the equity release calculator from Key .
Posted by Claire Ford