Equity Release is simply the ability for over 55’s to access the cash (equity) tied up in their homes to be used for any legal purpose. More and more providers are coming into this market and product innovation has allowed many different plan options from drawdown facilities through to income plans and many more. More information can be found here.

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Equity Release, as it is now known, started life in the 1960’s. There were three plan types available, these were: Home Income Plans, Home Reversion Plans and Shared Appreciation Mortgages. These predominately were annuity backed schemes to generate a little extra income. There was very little flexibility for changes throughout retirement once taken.

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There were a number of headlines in the 1980’s and Equity Release was seen as a bad choice due to a large number of dangerous schemes being mis-labelled as “Equity Release”. These schemes used a variable rate of interest for the mortgage loan and the investment bonds being taken also having a variable rate. These bonds provided an income which was higher (at the time taken) than the interest repayments on the mortgage, thereby giving the clients an income on top. Therefore, when interest rates increased to nearly 15% in the late 80’s, investment bonds reduced therefore any income being provided from the bond was insufficient to meet the mortgage repayments. Many homeowners were unable to meet their commitments and were repossessed.

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Due to this a trade body was launched in 1991 called Safe Home Income Plans (SHIP), this was then followed by today’s version, the Equity Release Council. This trade body introduced product standards by which everyone offering “Equity Release” products must abide by, these are: