ITV documentary fuelled outdated later life views – Access Equity Release
05 February 2020
By: Martin Wade, director, Access Equity Release.
I was very impressed with the Equity Release Council’s reaction to the ITV documentary on equity release that aired last month. Its social media post was certainly much more measured than my initial reaction to the documentary. “#EquityRelease Has Changed” “Sub 3% interest. No negative equity guarantee. Downsizing/inheritance protection. Interest repayment options.”
Yes, yes and yes. It was a positive reaction to highlight the realities of modern-day equity release, against the backdrop of a documentary that was, in my view, somewhat sensationalist and unbalanced. Some of the case studies were particularly problematic including one from 1997 in which a couple took out a £187,000 shared appreciation mortgage.
Sub 3% interest✔️
No negative equity guarantee✔️
Interest repayment options✔️ #EquityRelease has changed.
Visit https://t.co/7HwK3YkJuA to find an adviser or https://t.co/rZJzxuN7Ag to watch the #itvtonight doc in full pic.twitter.com/fJ2knsq51d
— ER Council (@Equity_Council) November 8, 2019
The presenter did mention that this type of loan was unusual. But he failed to point out that this sort of product, in which customers agreed to share a percentage of any future increase in the value of the property, bears little resemblance whatsoever to equity release products in the regulated market in which we operate today.
The legal expert on the programme did at least point out that shared appreciation mortgages were only on the market for a short time. However, there was no clear distinction between those types of loans and modern-day products. To say that equity release has changed since 1997 really is an understatement. There was certainly no mention of the inheritance or gifting options available to equity release customers today on the advice of specialists.
It did annoy me, but I was not entirely surprised. This suspicion of equity release is not new to those of us who specialise in it. Myths and misconceptions about equity release persist and the real tragedy of this is that it can be the right choice for so many of us entering retirement asset rich and cash poor.
There could be people struggling with cash flow in retirement who have no idea what releasing equity could do for them. The options available are increasing all the time. Today there are just over 300 products, compared to around 160 just 12 months ago. Competition means that current interest rates are attractively low. Many people have no idea of the life-changing potential the equity in their homes has for them and their families including much needed home improvements, better standards of living, repaying debts, travel and helping family.
So how do we tackle the problem of mistrust and misunderstanding? Head on in my view. Like the ERC response on social media. Positive messaging about the benefits of the many products available in the equity release market. Sharing that content widely. Answering questions. Showing how it works. Yes of course our advice must be balanced. The regulator demands it and rightly so.
Every client must understand every financial and legal implication of their decision and the agreement that they sign. They must be fully advised and informed before they make the choice. And if equity release is not suitable, the adviser must not recommend it. Instead they may refer to another specialist or in our case, our advisers are able to recommend other potential routes such as a remortgage if possible.
The demand for equity release will not slow in our ageing population. However, awareness of the potential benefits will not grow unless we shout from the rooftops. Equity release has indeed changed. Property wealth should be part of our financial planning for later life. As the documentary showed right at the end, with the right expertise, clients soon see through the myths and understand the potential of equity release.