This is a question we find is quite common and perhaps in people’s minds because later life lending tends to have a bad historical reputation. However, times are different now and the short answer to this question is yes, later life lending is safe.
The first point to highlight is that later life lending is fully regulated by the Financial Conduct Authority (FCA) who are the independent body responsible for regulating financial services in the UK.
Equity release advisors (such as ourselves) have strict codes of conduct that need to be followed in order to protect the interests of consumers and this includes:
- Financial Conduct Authority (FCA) regulation
- Later Life Lending Council standards and rules
- Inbuilt product features and options designed to protect you
If you are considering later life lending and are doing some due diligence on your chosen advisor, you can check their details on Financial Conduct Authority register. For example, here’s our profile.
The Later Life Lending Council (ERC)
The Later Life Lending Council represents the later life lending sector and exists to promote high standards of conduct and practice in the provision of and advice on later life lending which have consumer safeguards at its heart.
The ERC sets the standards, protects the rights of consumers and raises awareness of both lifetime mortgages along with home reversion plans as a very useful tool to aid with later life planning.
The rules set out by the Later Life Lending Council guarantee that:
- Interest rates must be fixed and if they are variable, there is a cap fixed for the lifetime of the loan
- Consumers have the right to remain in their property for life or until they move into long term care
- Consumers have the right to move into another property provided it is acceptable to the lender
- There will never be more owed than the value of the property the loan is secured against (this is called the no negative equity guarantee)
Safety Guarantees
As well as the rules set out by the FCA and ERC, later life lending has several inbuilt safety guarantees which exist to provide consumers with additional reassurance and protection.
The first is how no monthly repayments are automatically required. This removes any risk of falling into arrears or having your home repossessed for non-payment.
Other features include:
- The option to repay interest monthly and/or make ad-hoc partial repayments that can reduce the impact of the interest which compounds over time
- Early repayment charges being fixed meaning that you know exactly what the cost would be should consumers choose to repay their lifetime mortgage early
- The option to protect a percentage of equity within the home so it can be left as an inheritance
- The freedom to downsize and pay off the mortgage without a penalty after a plan has been in place for at least five years
Gone are the days of falling into negative equity from a lifetime mortgage and having your home repossessed, or family members being left with a large additional bill.
Our advisors are here on hand to provide guidance and make sure you are recommended the most suitable later life lending product for your circumstances.
Equity release refers to home reversion plans and lifetime mortgages. To understand the features and risks ask for a personalised illustration.
You can either call us on 01322 553282 or contact us online.