Early repayment fees for equity release customers who move in with relatives for the purposes of long term care will be waived in an update to Equity Release Council (ERC) standards clarifying the position. The updated version of its Standards and a new Customer Charter have been published by the in an effort to ‘set best practice’ within equity release and provide higher levels of consumer protection.
The new Consumer Charter outlines what customers can expect when working with ERC members and introduces clear guidelines on providing a ‘tailored, thorough and transparent process that ensures they received the right outcome based on their individual circumstances’ said Michelle Highman, Chair of the Equity Release Council Standards Committee.
“Significant work went into refreshing the Standards with the aim to make them clearer, more accessible and more consumer focused. Over a 12-month period, eight working groups went through the standards line by line before we consulted with our members and the wider industry to reach the final version. Customers look to the Equity Release Council to give them confidence to explore whether accessing housing wealth is right for them, and the Consumer Charter clearly outlines what they can expect from our members. We expect them to be able to trust in a tailored, thorough and transparent process that ensures they received the right outcome based on their individual circumstances.”
A new product standard, clarifying the position of outstanding equity release loans in the event the customer moves into a relative’s home for care purposes. Historically, if a customer moved into care in a formal setting such as a care home, the Early Repayment Charge was waived. However, with the number of people aged 85+ expected to grow by 62.7% by 2043, there is a need for older people to have access to flexible financial solutions in later life to support them through a number of circumstances say the ERC. The new Product Standard expands this to waive the early repayment charge if the person moves in with relatives to receive care and a medical practitioner’s certificate is provided.
“The Council and our members continually strive to grow our market and ensure that later life lending works for the greatest number of consumers possible. While equity release may not be right for everyone, for many it can be an essential lifeline to achieve the retirement they want and today’s launch means they can continue to do this with confidence.”
added Highman.
The ERC say the standards have evolved since they were first introduced in 1991 and have supported just under one million customers in that time.
From 6th May the Equity Release Council Product Standards are:
- Interest Rates: For lifetime mortgages the rate must be fixed for each release or, if variable, the rate must be capped for the life of the loan.
- Home for Life: You must have the right to remain in your property for life or until you need to move into long-term care, provided the property remains your main residence and you abide by the terms and conditions of your contract.
- Option to Move Home: You have the right to move to another property subject to the new property being acceptable to your product provider as continuing security for your equity release loan.
- No Negative Equity Guarantee (NNEG): The product must have a “no negative equity guarantee”. This means that when your property is sold, and agents’ and solicitors’ fees have been paid, even if the amount left is not enough to repay the outstanding loan to your provider, neither you nor your estate will be liable to pay any more.
- Ability to Make Repayments: All customers taking out new plans which meet the Equity Release Council standards must have the right to make penalty free payments, subject to lending criteria.
- Long-term Care: If a customer needs to move permanently into long-term care – whether in a care home or with relatives providing care – any early repayment charge will be waived by the Lender upon receipt of a medical practitioner’s certificate and the terms and conditions of the loan have been met
