Equity release not option of last resort, defends SHIP

22 September 2008 / by Rachael Stiles
SHIP – Safe Home Income Plans – has defended the concept of equity release as a viable method of releasing value from a property, after consumer watchdog Which? called it a 'last resort'.

For elderly homeowners who are struggling to make ends meet as the cost of living rises, equity release should only be used "if there is no other option", according to the new Which? guide for the elderly, 'Care Options in Retirement'.

The Which? guide warns that equity release might seem like a lifesaver to those who are facing financial problems in retirement, but that it can prove "expensive, inflexible and leave people with little or no equity in their home".

The schemes allow people to remain in their home whilst unlocking some of the capital from its value, but Which? warns that this can create problems if circumstances change and the individual needs to move into care or a retirement home, at which point some of the loan might need to be repaid and early redemption charges paid.

But, far from "severely limiting their choices later in life", as Which? warns, SHIP has defended equity release plans as offering an increasing amount of flexibility – "there are now products that offer the security of fixed rates with little or no redemption penalties, and recently we have seen rates falling, in stark comparison to the mainstream mortgage market." said Andrea Rozario, director general of SHIP.

While Which? might have highlighted some of the potential downfalls of equity release schemes which illustrate that they are not right for everyone, to Ms Rozario it seems that Which? "has a very outdated view on equity release", and that it has "not taken into consideration the market advancements of the past decade, let alone the last twelve months."

Not only is equity release not an option of last resort, she continues, but it presents a logical consideration for those thinking about how to boost their retirement income, allowing them to remain in their home with no rent to pay, and a no negative equity guarantee.

Ms Rozario concludes that "This, coupled with safeguards offered by SHIP members and compared to normal mortgages, not only means that the products are safe, but also incredibly flexible, offering people options that they might not otherwise have considered, which could vastly improve the quality of their lives."

Alex Edmans, development manager at Saga Business, also defended equity release, disagreeing with the opinion of Which? that it should only be considered once all other avenues have been explored.

"Equity release gives consumers a choice." he said. "Most people would not want to be forced into the decision of having to move into a smaller property and equity release gives them the option and ability to remain in their own homes."

© Fair Investment Company Ltd