Equity Loans Need To Evolve
There has been a growing popularity in equity loans over the past few years, largely as a result of increasing house prices and poor retirement planning and investment returns amongst those individuals approaching retirement.
Home income plans, or equity release loans are designed to allow people over the age of 60 to take a loan out based on the available equity in their home, without having to make any monthly repayments, instead interest rolls up on the loan account and is repaid when the house is sold, or the borrower dies. But the main trade body for equity loans, SHIP (Safe Home Income Plans), has released a paper this week which claims that this type of loan product needs to evolve and adapt in order to meet the needs of consumers going forward.
The paper entitled “Facing the future, redefining equity release to meet today’s social and economic challenges” claims that the current range of equity release loan products are quite restrictive and adopt a “one size fits all” approach, despite the fact that these products are used for a wide range of purposes from paying off existing loan debts, to improving lifestyle in retirement, or even for inheritance tax planning.
SHIP has launched a debate which includes, providers, regulators, consumer groups and the government which is designed to help widen the range of loan products available through equity release, making it more adaptable to meet an individual’s specific needs and an integrated part of retirement planning and financial solutions.
Andrea Rozario of SHIP said “There needs to be a wide ranging debate about the way housing equity may be used in the future, reflecting wider social and economic trends. It is widely believed that the un-mortgaged housing equity held by many older people could help with the huge pressures on retirement and care funding. But the case is not yet proven. Therefore, with our discussion paper, we call for the government to launch a formal enquiry into how equity release can play a role in helping fund retirement needs now and in the future.”
