Teresa Fritz is a Member of the Financial Services Consumer Panel and an independent consumer finance consultant.
All blogs are the views of the author, and do not necessarily reflect the views of Independent Age.
The chances are that many people reading this will struggle to manage on the income their state and private pensions will provide. I know I will.
Most people, then if they are homeowners, will be looking to the equity in their property to help them. “I’ll just downsize” is a statement I hear often.
But things aren't always that simple. The costs of moving, not to mention the actual cost of the two-bedroomed flat with a garden and enough space to take all the paraphernalia from a life in a three-bedroomed house, will take a sizeable chunk of your equity.
So when that particular bubble bursts, many people turn to equity release schemes – a solution right for some, but not for others. However, there is no magical release of equity. Instead you have the choice of a mortgage with interest rates well above traditional mortgages and the prospect of your debt doubling in ten years; or selling part of your home at a huge discount but with the right to stay living there and maintaining it at your expense.
With some products there are also confusing, restrictive and changeable terms to navigate through.
Even some of the more flexible drawdown products (which allow people to borrow smaller amounts and come back for more) have minimum levels of drawdown that may be too high for some consumers, forcing them to borrow more than they need and build up a debt that is too high, too soon.
For years, government and the financial services industry have been promoting equity release as a means of solving two major issues of later life: low retirement income and long term care funding. But despite the high hopes and glossy marketing, the market remains tiny and shunned by the very people who need it most. Why?
Because with one or two exceptions the market just isn’t delivering the choice, clarity, value for money and flexibility consumers have the right to demand. It is dominated by three large lenders and three large adviser firms, which, for a market as crucial as this just isn’t good enough.
It’s too easy to come up with good reasons for bad products but the excuses have to stop. This market is in dire need of new products, new lenders and new life breathed into it. Until it acknowledges this and starts to change, consumers will stay wary – and so they should.
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