Equity release 'scandal brewing' akin to Equitable Life fiasco

Regulator ‘asleep at the wheel’

Victoria McKeever
clock • 2 min read

An undervaluation scandal is brewing in the equity release mortgage sector that is similar in nature to the Equitable Life fiasco of nearly two decades ago, a report from the Adam Smith Institute has warned.

The report, written by Durham professor of finance and economics Kevin Dowd, has said the ‘no-negative equity guarantees' (NNEGs) issued by lenders in the market lie at the heart of the problem. NNEGs guarantee the maximum repayment on equity release loans be no greater than the property price at the time of repayment. "This undervaluation problem is a ticking time bomb that could do serious damage to the financial health of the Equity Release sector," Dowd warned.  Equity release lending closes in on £1bn in record quarter  He argued the Prudential Regulation Authority had made "h...

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