Equity Release Council updates its strict set of Standards
The Equity Release Council has updated its Standards to offer enhanced protections for lifetime mortgage customers. They include new Standards for mandatory payment lifetime mortgages, and the requirement for advisers to cover income and expenditure as part of the advice process.
As the equity release industry grows and develops innovative new products, the Council regularly reviews and updates its Standards, which all its members must abide by. These initial changes are the first tranche of updates and came into effect on 1 March 2024. A wider refresh of the Standards is planned for later in the year.
One of the more recent industry product innovations has been the introduction of mandatory payment lifetime mortgages. The Council has written a new set of standards specifically relating to these new products, which include:
- The right to remain in your home as long as mandatory payments are made.
- Arrears plus arrears interest are liable outside of the ‘no negative equity guarantee’.
- The right to make voluntary penalty-free payments is only available once your mandatory payment period has ended.
Typically with equity release, homeowners do not have to make any mandatory payments until the plan comes to an end. Usually, this is when they pass away or move into long-term care.
However, some equity release lenders have recently introduced mandatory payment plans to help younger customers access higher loan-to-values than would normally be available to them. Typically, these plans require contractual payments of partial interest from the age of 55 up to a specified age, say 66, before switching to a standard roll-up lifetime mortgage.
The Council’s new Standards also include the requirement for advisers to cover income and expenditure during the equity release advice process. Whilst this vital topic has long been included in many adviser discussions, the inclusion makes it mandatory and ensures a consistent approach.
Michelle Highman, Chair of the Equity Release Council’s Standards Committee, said: “The evolution of our Standards is key to helping the market continue to grow and ensure that the diverse customers who choose to access their housing equity can do so with confidence.”
