Lifetime mortgage plans have become very popular in recent years, when people are looking for flexible and innovative solutions to enable them to maximise their financial assets and plan effectively for retirement. As the demand and use of these products has increased, they have been brought increasingly into the realm of mainstream finance and become more regulated and secure for consumers.
The Equity Release Council is an industry body that spans the entire equity release sector and represents all those who work in this industry, including equity release providers, financial advisers, surveyors and lawyers. What was formerly the Safe Home Income Plans is now the Equity Release Council and the equity release schemes approved by the ERC are mandated to follow the guidelines laid down by the SHIP Standards Board.
The main aim of the equity release council is to make the equity release sector transparent, set standards and guidelines that protect and reassure consumers and increase awareness about equity release products.
The Financial Services Authority (FSA) is an independent non-governmental body that regulates the financial services and industry in the UK. Bodies such as the FSA and ERC are important in the transparent functioning of the equity release sector as they help make customers more aware of the advantages and disadvantages of equity release products and protect them from malpractice and financial fraud.
For instance, negative equity in roll up lifetime mortgages was at a crisis level, when the FSA intervened. Compounding interest on lifetime mortgages meant that the debt could quickly grow uncontrollably and disproportionately large, so much so that it not only could erode the financial assets of customers, but also meant that beneficiaries of customers had to pay the lender any negative equity that had accrued on the loan.
Today, all approved equity release schemes have a no negative equity guarantees which protect customers.
The growing interest and demand for home reversion and equity release in general meant that it was sensible for home reversion plans to come under the scope of regulation by the Financial Services Authority. And since April 2007, all home reversion equity release plans are regulated by the FSA (Financial Services Authority).
The Equity Release Council and the FSA cover home reversion plans and provide added protection to consumers. All ERC approved home reversion plans are required to follow the consumer protection guidelines laid down by the Ship Standard Board. However, whether a home reversion plan is right for them is for the consumer to ultimately determine. It is important to seek independent financial advice before making any final decision regarding equity release, as an advisor can help you understand how the plan will impact on your tax position, your eligibility for benefits and your future plans.
Tags:Equity Release Council, Equity Release Products, Equity Release Providers, Equity Release Schemes, Equity Release Sector, Financial Services Authority, Home Reversion, Home Reversion Plans, Lifetime Mortgage Plans, No Negative Equity Guarantee, Roll Up Lifetime Mortgages, Safe Home Income Plans, SHIP Standards Board