Bower’s Chief Corporate Officer, Andrea Rozario, responds to Andrew Castle’s scathing article on equity release published by the Sunday Times and the Mail online, tackling his misunderstanding of how equity release works and uncovering the truth behind the claims.
The piece discussed a complaint made to the Financial Ombudsman Service following his wife’s parents taking out an equity release plan six years ago to enable them access to money tied up in the value of their home. Apparently the former tennis star’s issue lies largely with the compound interest and an early redemption charge on the lifetime mortgage product.
A complaint was made following the unnamed lender’s enforcement of the early repayment charges which, it was found, were clearly laid out in the documentation signed by Mr Castle’s in-laws. As a result this complaint was not upheld. The FOS made it clear that all charges were documented and the clients had taken independent legal advice at the time – an industry requirement that double checks customers fully understand the nature of the contract. However it begs the question, why were the customers apparently still confused?
As an industry we insist on clients having a full advice process specifically to ensure they fully understand how compound interest works, and to stress that the plan is long term and charges may apply if repaid early. There are strict and extensive regulations and safeguards in place for all equity release products, and documentation is produced showing the customer exactly how much their loan will accrue to each year.
Today’s equity release plans are more flexible than ever, and customers are always asked if they intend to move in the future, with plans available enabling them to do this and repay the plan in full. If compound interest is a concern there are also plans available to enable the customer to make monthly repayments; as well as the option to have fixed early redemption penalties over a certain time frame.
With regards to Mr Castle’s issue with compound interest – many people choose to take equity release because of the fact that no monthly repayments are required, it enables them to access the cash tied up in their property without any impact on monthly disposable income. This working of equity release is often central to the appeal of a plan for many.
Without the option of releasing equity with no need to make monthly repayments, many homeowners in or approaching retirement would be suffering a poorer standard of living while residing in their biggest asset. For this reason, demonising an industry that actually provides an essential option for many is irresponsible and unhelpful – and the sensationalist headlines in the Andrew Castle story do not portray a true and wholly accurate picture.
The former tennis star’s ‘vilification of equity release’ appeared to be a heated reaction to the complaint being dismissed by the ombudsman. His apparent lack of awareness that his in-laws had decided to take equity release also begs another question, why were they not involved at the outset? This is unusual in an industry where advisers strongly recommend customers involve the wider family in the process so that there are no surprises later down the line. However, this decision is of course the customers, and if someone does not wish to discuss it with their children then that is their personal choice. It would seem that this must have been the case for Mr Castles’ in-laws.
For those thinking about unlocking cash from their home, the recent equity release debate has certainly highlighted the importance of seeking independent specialist advice. That’s why Bower are proud to offer an award-winning impartial service to ensure homeowners receive the utmost safety and customer care when considering this option – and why we’re rated 100% positive by our customers on the global feedback website Feefo.
One satisfied customer on Feefo, Moya Greaves, said of her Bower adviser: “[She was] extremely informative, allowed me plenty of time to research and come to an informed decision, then a very prompt service and l was never pressured to make a decision which l thought was a bonus. [She] went over every detail and settled any queries l came up with. I would definitely recommend them.”
This is a lifetime mortgage or home reversion plan. To understand the features and risks, please ask for a personalised illustration.
If you are considering equity release we strongly recommend that you read our ‘Advantages and Disadvantages of Equity Release’ page carefully.
