Equity release: handle with care

Make sure you are getting the right equity release product and are choosing from all the available options.


The charity, Age UK, does all sorts of good work. It provides a wealth of information and advice, and generallytries to make life better for the elderly.But apparently it also makes moneyby directing you to an equity-releaseadvice service, Hub Financial, which is weighted towards products offered by Hub's own parent company, Just, saysThe Daily Telegraph.

Note that when people are sent to the advice service, they go through Age UK's commercial arm, Age Co. This was formed in the wake of criticism from the Charity Commission in 2016, which pointed out that the charity was channelling people towards an energy tariff that wasn't the cheapest option in the market; it emerged that it had formed a partnership with provider E.ON. While this separation seems right and necessary, it's doubtful whether many people would draw the distinction between a charity and a commercialbody whose websites have verysimilar branding.

Subscribe to MoneyWeek

Become a smarter, better informed investor with MoneyWeek.

As far as the equity-release arrangement is concerned, when someone takes out an equity-release loan (borrows money against their property), Age Co gets up to 0.75% of the value of that loan. Although Hub discloses that it only compares deals from five companies, "the way its advice process is structured means that in most cases a customer will be offered a deal by just one panel member Just", says Adam Williams in The Daily Telegraph. "Hub's staff follow a methodology that prompts them to offer Just for the most common consumer needs."

The story, while also casting Age UK in a rather unfortunate light, underlines the importance of making sure that you get the right equity-release product for you. As we've discussed in MoneyWeek many times over the past decade, equity release used to have a terrible reputation for ripping people off, and not without reason. Many people took out loans where the interest payments were rolled up to be paid off at the end. If the loan ended up being worth more than the value of the property associated with it, people's heirs found themselves saddled with massive debts to repay.

Advertisement - Article continues below

Thankfully, the industry has cleaned up its act in recent years, largely because it is now regulated by the Financial Conduct Authority. And it has become increasingly popular. Equity-release loans worth a record £935m were taken out in the first three months of this year, up 8% on 2018, according to the Equity Release Council. If you're considering equity release, make sure you're as well-informed as possible before signing up. You will have to take financial advice on the decision, and must use a specialist broker when choosing a product. Ensure you factor in the combined cost of this advice, legal services and the required property valuation. Depending on the type of plan, expect to pay between £1,500 and £3,000 in arrangement fees, warns the Money Advice Service.

Watch out for plans that include hefty exit fees, which fall due if you want to pay back the loan early. If you think you might move in future, you will probably want a product that allows you to "port" your loan to another property. You should also consider potential complications, such as whether the money you receive will affect your benefit entitlements. Finally, note that reputable providers will offer a no-negative equity guarantee, which means you or your estate should never have to pay back more than the value of your property.

If you’d like to find out how much equity you could release from your home, or to find out more about equity release in general, visit our partners UK Experts Online, for a free report.



Equity release

Tread carefully if you're thinking about equity release

The equity release market is getting its act together. But the cost means tapping your property for cash should be a last resort for most people. 
25 Nov 2019

Living on a houseboat: the pros and cons of a floating home

Living on a houseboat sounds romantic and peaceful. But it’s not as straightforward as it looks, says Nicole Garcia Merida
14 Feb 2020
Equity release

Equity release: how to tap your house for cash

The pros and cons of releasing equity from your home compared with moving to a smaller one
10 Feb 2020
House prices

Like it or not, UK house prices appear to be rallying

The UK housing market seems to be perking up. But that may not be a good thing, says John Stepek.
29 Jan 2020

Most Popular

UK Economy

How the BBC can survive the end of the TV licence

The TV licence that funds the BBC is looking way past its sell-by date, says Matthew Lynn. Here's how it could survive without it
16 Feb 2020
UK Economy

Britain has a new chancellor – get ready for a major spending splurge

The departure of Sajid Javid as chancellor and the appointment of Rishi Sunak marks a change in the style of our politics. John Stepek explains what's…
14 Feb 2020

Living on a houseboat: the pros and cons of a floating home

Living on a houseboat sounds romantic and peaceful. But it’s not as straightforward as it looks, says Nicole Garcia Merida
14 Feb 2020

The rare earth metal that won't be a secret for long

SPONSORED CONTENT – You can’t keep a good thing hidden forever; now is the time to consider Pensana Rare Earths and the rare earth metals NdPr.
31 Jan 2020