The government has a duty to make the benefits of equity release clearer to encourage more advisers to accept it, according to speakers on IFAonline TV.
Speaking on the latest edition of IFAonline.tv - entitled the Great Homeowner Debate - Jan Holt, head of sales in the lifetime mortgages division at Prudential, says consumer confidence in equity release is growing after the introduction of mortgage regulation but she warns IFAs are still not proactively accepting it.
She believes the industry faces an advice challenge over how to utilise an asset without selling it on.
Ray Boulger, senior technical manager at Charcol, says the information on equity release is available for advisers but suggests they are concerned about whether the reward justifies the risk, so the government should step to improve understanding.
He adds: “The government doesn’t help because it is not clear about the benefits. It has a duty to make it clearer.”
Furthermore, he says the report by Which? in January, which attacked equity release schemes as expensive and inflexible, was “grossly irresponsible” and has added to the reluctance of IFAs to use such schemes.
He argues lifetime mortgages are good value because the interest rates are usually below 6% and if the estate is liable for inheritance tax the consumer essentially gets 40% tax relief on the amount they borrow and on the interest rate.
“This makes lifetime mortgages cheaper than other mortgages,” says Boulger.
Likewise, Holt argues Which? failed to highlight consumers may be achieving property growth and can therefore remain at a neutral level of equity withdrawal on their property, after the interest on the loan is repaid.
If a consumer is over 60 years old and equity release is a useful tool in their retirement plan, Holt says IFAs need to service this need and not be put off by Which?.
But Harry Katz, principal at Norwest Consultants, suggests equity release may not always be suitable, stating: “I’m not sure money in the hand is the best idea – once it is spent the person is back to where they started and owns less.”
He argues reversion plans have more discipline to them and may be more appropriate.
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Emily Perryman on 020 7968 4554 or email [email protected].IFAonline
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