How has the UK set the ‘gold standard’ for equity release?
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The UK has set a benchmark standard for equity release, thanks to five key factors that support consumer confidence, product innovation and service standards. That’s the view of a consultant specialising in financial services technology.
In his piece for IFA Magazine, Warren Bleechmore of financial service technology specialists Finova shares lessons from the UK equity release sector. He believes product providers and financial advisers elsewhere could learn from the UK experience.
He spells out five reasons why equity release in the UK has grown from a niche sector to a mainstream part of the lending market:
Industry standards
Providers and advisers who are members of the Equity Release Council sign up to the Council’s Standards, which require members to “act with professionalism and integrity, providing trusted, transparent, tailored, and thorough advice and support”.
The six standards include the right to stay in your home for life or until you need long-term care, and the right to take your equity release plan to a new property. The important ‘no negative equity guarantee’ means neither you nor your estate will never owe more than your home is worth.
Regulatory oversight
The Financial Conduct Authority (FCA) is part of what Warren calls a “regulatory ecosystem” that has given consumers confidence that equity release products are subject to “rigorous oversight”. He says that the FCA plays “a key role in monitoring standards and supporting practices that protect consumers while encouraging innovation”.
Product development
In the past few years, equity release providers have taken an innovative approach to product development. An early example of this was the launch of drawdown lifetime mortgages that allows customers to access the equity they release in stages rather than a one-off lump sum. This will typically reduce the interest that accrues on their loan.
More recent examples include lifetime mortgages with more repayment options that offer greater flexibility than had previously been the case.
Warren says: “Markets that cling to rigid product structures risk being left behind. And as global demand for equity release grows, flexibility will be key. Features like interest servicing options, downsizing protection, and penalty-free early repayments are fast becoming must-haves for today’s customers.”
Collaboration across the sector
Warren states that another factor in the success of equity release in the UK is collaboration between advisers, legal professionals, lenders and technology providers. He says that this has contributed to a “a smooth and supportive journey for clients, which is vital when dealing with such emotionally and financially significant decisions”.
Digital infrastructure
Finally, Warren points to the role that technology is increasingly playing in equity release advice, underwriting and service: “Digital tools have dramatically improved efficiency and customer experience.”
