What is the Equity Release Council and why is it Important?
If you’re looking to use a form of equity release to access equity in your home, there are safeguards in place to help protect homeowners – including standards set out by the Equity Release Council.
If you’re considering equity release, you might have come across providers that are members of the Equity Release Council. While you’re likely to have an inkling that this is a good thing, what does it actually mean in practice?
Here’s how this UK trade body links to equity release products and the protection it could offer when considering a lifetime mortgage or home reversion plan from its members.
What does the Equity Release Council do?
It’s an independent trade body that was set up to promote higher standards across professionals who work in the equity release industry, and for the products and services they offer. This includes advisers, providers and solicitors, along with affiliates and associates involved in the equity release market.
It also endeavors to be the voice of the industry – aiming to bust myths about equity release and help people understand the benefits and risks – though we’ll focus on consumer safeguards for advisers and products here.
How does this help you?
If you consider using a provider who is a member of the Equity Release Council, they have committed to follow a level of conduct. When you take out a lifetime mortgage or home reversion plan, which are the two types of equity release, members of the Equity Release Council should offer you:
- clear, transparent and impartial advice
- fairly priced products and services that are right for you
- support if you have a vulnerability, such as a recent bereavement or financial difficulties
- clear information to explain that you can stay living in your own home for as long as you like or move when you choose to
- an explanation of your rights and responsibilities at every stage
How are you protected when you take out equity release?
The Financial Conduct Authority (FCA) is the financial regulator for Equity Release. Any firm offering Equity Release services or products must be authorised to do this by the FCA. These firms must:
- Offer access to a specifically qualified equity release adviser. Before you can proceed with equity release the adviser must explain all the costs involved in the plan, how it will affect tax, benefits, and how it works if you move or the value of your home changes.
- Ensure the customer is fully aware of the all short and long-term financial implications of equity release, and have a clear complaints process in place.
In addition, working independently from the FCA, is the Equity Release Council, which requires its members to uphold its own set of guidelines and standards. The Equity Release Council is not regulated by the FCA.
» MORE: Is equity release safe?
How does the Equity Release Council safeguard homeowners?
If you take out an equity release plan offered by an Equity Release Council member, it must offer all of these benefits to be able to say it meet its product standards:
- You can live in your home as long as you like, until you die or go into long-term care, if you keep to the terms of the contract. The provider must explain what it defines as long-term care in the product documents
- You can move home if you want to, if the property meets the provider’s requirements, using your new home as security for the loan.
- You pay a fixed or variable interest rate for the entirety of the loan if you have a lifetime mortgage. If it’s a variable rate, it should be capped, which means it can’t go above a certain limit.
- You get a no-negative equity guarantee, which means that when your home is sold, if there isn’t enough from the sale to cover repayment of the loan plus interest, you or your beneficiaries won’t have to pay the difference.
And from 28 March 2022, a fifth standard has been added. This guarantees that all new lifetime mortgage plans from members of the Equity Release Council will let you make partial repayments of your loan without a penalty fee for early repayment.
If the provider doesn’t offer all of these benefits, the Equity Release Council says this should be clearly stated in the product information, including the risks that come with that.
What rules do members of the Equity Release Council have to follow?
The Equity Release Council has set rules that their members sign up to and commit to follow. It also set out principles and guidance for professionals that encourage them to follow best practice. Its statement of principles, are for all its members, including firms, advisers and solicitors who work in the equity release sector.
Included in these principles is that their members must always have the best interest of their customers in mind, act in good faith, and only offer them products and decisions suited to their circumstances.
How do I know an adviser or provider is a member of the Equity Release Council?
You can check that an adviser, provider or solicitor is a member of the Equity Release Council by using its member search. Only members can use the Equity Release Council endorsement mark.
You can use an equity release adviser the provider recommends or your own independent financial adviser, though they must be FCA authorised and have the correct equity release certification. You will also need to hire a solicitor to get independent legal advice before the plan can go ahead.
Solicitors and advisers who are members of the Equity Release Council will have the necessary qualifications and should follow its rules and standards.
It’s worth mentioning that while safeguards are in place, equity release is a big financial decision with long-lasting effects, and it isn’t right for everyone. Make sure you’ve weighed the risks up and considered other ways to raise the cash before going ahead.
» COMPARE: Lifetime mortgage equity release
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Holly champions clear, jargon-free writing. She’s been creating finance content for leading organisations for over 10 years. Read more