Equity Release Schemes - UK - May 2014
Introduction
 
Prospects for the equity release market are improving. There is growing customer demand for lifetime mortgages, greater government engagement and increased interest being shown by both retirement planning advisers and prospective entrants. This includes mainstream lenders looking to enhance their at-retirement offerings or find a potential solution to the interest-only mortgage conundrum. 

While the market remains small and served by a limited number of providers (most from the insurance sector), there is considerable scope for expansion and further product development. There is also an increased likelihood of new entrants from the banking sector launching products, either on their own or in partnership with an incumbent, in the near future. 

Mintel’s report examines the factors and trends that are helping to drive demand for equity release, and identifies the main market challenges still facing providers, as they seek to change perceptions and cement equity release as a mainstream retirement planning option. The report draws on industry research to evaluate recent sales performance and usage trends, as well as the results of an independently commissioned consumer survey. Mintel’s survey assesses awareness of – and reveals the level of interest in – equity release among homeowners in (and approaching) the target age group.

Market definition 
Equity release is a way of accessing the wealth tied up in a property without the need to move. With equity release, homeowners can either borrow against the value of their home (a lifetime mortgage) or sell all or part of it (using a home reversion plan) in return for a regular monthly income, a lump sum or the facility to get at equity as and when they like (drawdown) or a combination of these options.

To be eligible for equity release, homeowners must meet the following criteria:

●	aged 55 or over (or 60+ for home reversion plans); for joint plans the youngest borrower must be at least 55
●	own their property outright or, in some instances, have a very small outstanding mortgage
●	the property must be in England, Scotland or Wales.

For more detailed product information, please see Appendix.

Equity Release Council
The Equity Release Council (formerly Safe Home Income Plans or SHIP) was established in 1991 and is the industry body for the equity release sector. Expanding the remit of SHIP, the Equity Release Council represents the providers, qualified financial advisers and other intermediaries, lawyers and surveyors who work in the equity release sector.

Although membership is voluntary, all equity release providers are members. They agree to follow Codes of Conduct rules, which encompass certain safeguards, namely:

●	Customers must be able to remain in their property for life, provided the property remains their main residence.
●	Customers will be provided with fair, simple and complete presentations of their plans. This means that the benefits and limitations of the product, together with any obligations on the part of the customer, are clearly set out in their literature. It should include all costs that the customer has to bear in setting up the plan as well as the tax implications, their position on moving house and the effects of changes in house values on their loan.
●	The client’s legal work will always be performed by the solicitor of his or her choice. The solicitor will be required to sign a certificate to the effect that the plan has been explained to the client fully and that they understand the risks and benefits of the plan.
●	Customers have the right to move their plan to another suitable property without any financial penalty.
●	The Equity Release Council certificate will clearly state the main cost to the householder’s assets and estate, eg how the loan amount will change, or whether part or all of the property is being sold.
●	All Equity Release Council plans carry a no-negative-equity guarantee, meaning the customer will never owe more than the value of their home.

Abbreviations
ABI	Association of British Insurers	
AER	Annual equivalent rate	
APR	Annual percentage rate	
CML	Council of Mortgage Lenders	
COB	Conduct of Business	
FCA	Financial Conduct Authority	
FSA	Financial Services Authority	
GAD	Government Actuary’s Department	
IFA	Independent Financial Adviser	
IHT	Inheritance Tax	
LTV	Loan to Value	
MCOB	Mortgage and Home Finance Conduct of Business	
MMR	Mortgage Market Review	
NMR	Nielsen Media Research. For further information, please contact nmr.communication@nielsenmedia.co.uk	
ONS	Office for National Statistics	
SHIP	Safe Home Income Plans	
SPSS	Statistical Package for the Social Sciences	
SWOT	Strengths, Weaknesses, Opportunities, Threats	

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