Equity Release: How Is It Regulated?

Once a dubious financial product, equity release has done a 360 over the past few years and is now one of the safest and best retirement solutions for over 55s. More and more institutions offer specialist retirement products to help UK-based homeowners with their financial needs, as seen in this comprehensive review of Key Equity Release.

You’re probably wondering how the industry is shifted and how is it regulated in 2022? John Lawson, one of the UK’s most prominent equity release experts and founder of SovereignBoss, explores this topic in the following report.

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Equity Release in Years Gone By

Before 1991, the equity release industry was an unregulated market, with lenders often taking advantage of older homeowners’ property wealth and a desperate need for cash. Between sky-high interest rates and no protections, it was not uncommon for older folks to lose their property after unlocking equity.

Fortunately, the industry has since shifted, and the interests of property owners are now protected thanks to the Equity Release Council.

The Role of the Equity Release Council

Established in 1991 and first called SHIP, the Equity Release Council was born to clamp down on dodgy lenders, protect the consumer, and ensure equity release is a fully safe and regulated financial product.

All lenders that are members of the Council must adhere to a strict code of conduct. These include:

The no negative equity guarantee which ensures that any additional equity release debt is written off beyond the property’s sale value.
All older homeowners unlocking equity must seek professional financial advice, whether whole market or through a lender.
The homeowner or joint owners have the right to live on the property until they pass away or enter long-term care.
All equity release products must come with clear and concise paperwork outlining all the terms and conditions for the borrowers.
A solicitor must be involved in the equity release process.

The Newest Equity Release Council Announcement

In addition to the above safety measures, equity release regulations are further expanding. The Council announced that all new plans unlocked from 31 March 2022 must have the option of voluntary loan and interest repayments.

This is massive because homeowners can now pay off their equity release plan within 3 to 10 years, stopping and starting whenever they wish.

The Financial Conduct Authority (FCA) & Equity Release

Further to the Equity Release Council, the Financial Conduct Authority (FCA) oversees the entire financial industry as the UK, with equity release falling under this umbrella. They regulate approximately 51000 various financial products, weeding out scams and corruption within the sector.

Is Equity Release 100% Safe?

Yes, unlocking equity from your home in 2022 is safe, as long as it’s done through a member of the Equity Release Council and with the help of a financial advisor. With unprecedented regulations, equity release products come with a series of strategies to ensure that older UK homeowners are not cheated out of their properties.

While the Council regulates the industry, there’s no guarantee that you’re always going to be safe, but there are surefire signs that you’re working with a dubious lender. Anyone that gives you cash overnight or doesn’t review your circumstances should strictly be avoided. And, of course, never go for a lender that has no affiliation to the equity release council.

In Conclusion

Now that you understand how equity release is regulated, you can unlock cash from your home with confidence. Step one is to contact a direct lender or find a financial advisor specialising in equity release. Our team at SovereignBoss always recommends a whole market financial advisor as they have access to the entire equity release industry. They’ll help you find a safe, well-managed, and fully regulated plan by one of the leading equity release providers. Your financial relief is just a few steps away.

David Prior

David Prior is the editor of Today News, responsible for the overall editorial strategy. He is an NCTJ-qualified journalist with over 20 years’ experience, and is also editor of the award-winning hyperlocal news title Altrincham Today. His LinkedIn profile is here.