Head to head: Would you recommend equity release?

Equity release products have been subject to significant debate among industry experts and the media for some time. Charlotte Richards talks to two advisers about the pros and cons.

Dave Penny, managing director at Invest Southwest, says at present the terms of equity release are fair with reasonable rates and 
good flexibility.

He believes the days of releasing equity to invest in high commission bonds are over, however not in the minds of the more cautious older generations, for whom equity release options do apply.

Penny says both advisers and the public view equity release with suspicion. “Advisers think it is difficult to gain authorisation, crippling in terms of professional indemnity insurance and generally a can of worms,” he says.

He disagrees: “This is not the case and if an adviser truly wants to be able to advise clients for all aspects of life, then having the knowledge of equity release options is vital and unavoidable.”

However, despite the flexibility and reasonable products now available, equity release should be considered as a last resort for any client, he says.

Such a low take up may be a sign that the finances of over 60s are not as dire as is sometimes feared.

“A fully authorised adviser, working in the client’s best interests, will always explore other alternatives and encourage examples such as downsizing their house rather than 
equity release.”

Penny thinks demand for equity release will inevitably rise as the market will continue to grow. More providers have been covering more products through advertising in the media.

As the hardship of recent years continues, it only increases the problems surrounding equity release, he says. Additionally, a paralysed housing market makes downsizing homes very difficult.

High inflation has made retirement increasingly unaffordable. Unlike the past, children and grandchildren are relying on older generations for financial help thus leading to equity release being the final option, he says.

“Equity release allows older generations to afford care in their own home, rather than becoming institutionalised.”

He adds he has seen cases where equity release has arguably extended the life of the client as moving home is undoubtedly stressful an undesired. “So, a life saver,” he says.

 “The market is only ever going to become bigger and bigger in the next decade”