Warning FSA plans won't protect equity release customers

The FSA’s consultation paper on the mortgage market review (MMR) does not go far enough to ensure consumers are provided with a full range of equity release options, the Society of Equity Release Advisers (SERA) says.

Last week, the FSA's consultation paper on the Mortgage Market Review included proposals to replace the obligation to issue an initial disclosure document with a requirement to disclose key information on how intermediaries are paid and for which services.

The paper also includes proposals to introduce stricter qualification requirements for anyone selling mortgage products.

However, SERA claims the proposals do nothing to enforce the provision of advice on both lifetime mortgage and home reversion equity release plans.

It says the FSA's suggestion that equity release advisers must only disclose the scope of their service in each market sector is ‘wholly inadequate'.

"Equity release involves the greatest asset [most people] will ever own, being utilized at a most critical point in their life; therefore expert advice is essential," a SERA spokesperson says.

"FSA should insist intermediaries advise on both types of equity release plans and consider the affordability of alternative traditional capital raising methods such as an interest-only or repayment mortgage.

"Those who offer just one type of equity release product are not true specialists and may short change consumers in pushing their limited proposition, particularly where the adviser only has regulatory permissions to offer lifetime mortgages."

The SERA spokesperson adds in many cases clients would be better off with a home reversion plan than a lifetime mortgage, but few people are offered this option.