More than half of UK consumers believe equity release is risky due to serious misconceptions they hold about these products, new research reveals.
According to a survey conducted by Key Retirement Solutions (KRS), the top four reasons consumers feel equity release is risky are the fear of falling into negative equity (61%), fear among individuals they could lose their home (45%),a belief the products are too complex. (34%) and the belief the products are unregulated (15%).
The results of the research highlighted the serious disparity between consumers' perception of equity release and the reality of these products, says the provider.
Dean Mirfin, business development director at Key Retirement Solutions calls the lack of consumer understanding of equity release alarming saying It is very worrying people have perceptions of equity release that are incorrect.
He argues this is even more worrying given it is these persistent myths that are responsible for people shying away from equity release.
"With rising concerns over a looming pension crisis, it is important that people are aware of all the options available to help them fund their retirement. With the high levels of equity held in property by the over 65s, there is tremendous scope for today's retirees to use equity release to boost their disposable income. It is worrying that people may not consider this option due to persisting misconceptions,“ he says.
"This research clearly shows that we have to work very hard to communicate with consumers to ensure that they understand the products and are aware of the rules and regulations in place to protect them. We think it is important to work against these misconceptions to make sure everyone can make an informed choice about their retirement planning."
Despite such concerns the nineteen members of UK equity release industry body, Safe Home Income Plans (Ship) report third quarter figures to 30 September 2005 are the highest to date in 2005 and show a significant increase in home reversions business written.
Ship says it believes this reflects the fact that property price inflation is far lower now than in recent years, which is making reversion products more attractive.
The total value of new business written was £293.6m, 12.5% ahead of the second quarter in 2005 at £260.9 m.
Home reversion plans increased significantly from £10.6m in the second quarter to £17.3m now. Year on year home reversions have leapt from £9.6m this time last year-a rise of 80%, says Ship.
Meanwhile, despite an increase in business in the second quarter of this year from £250.3m, year on year figures show a considerable drop in the value of lifetime mortgages business written from £328.8m in the third quarter of 2004 to £276.3m now.
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 Matthew West on 020 7484 9893 or email [email protected].Jon King, chairman of Ship says the figures show the lifetime mortgage market has begun to slip back despite it being a record quarter in 2005. King adds: “This reflects continued uncertainty in the property market and speculation that house price inflation is not likely to be as great in the future as it has been in the past. This may see increasing numbers of consumers turning to home reversions in preference to lifetime mortgages as the proportion of the house sold is fixed.”IFAonline
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