SHIP WELCOMES DEFAQTO REPORT
Safe Home Income Plans (SHIP), the industry body representing over 90% of the equity release market has welcomed the recent Defaqto Report which warned of the cost to lenders of providing a No Negative Equity Guarantee with these products.
Chairman Jon King believes that the report provides a useful contribution to the debate on the value and cost of SHIP members’ No Negative Equity Guarantee and serves as a useful reminder to IFAs about why equity release products carry higher interest rates than conventional mortgages.
Jon King commented:
“SHIP welcomes the Defaqto Report as a valuable contribution to the equity release debate. The report confirms that offering a no negative equity guarantee costs money- one of the reasons why equity release mortgages are more costly than conventional mortgages and an issue that tends to confuse both IFAs and consumers.“ The other reasons are that finance for equity release mortgages is priced via long term interest rates rather than money market rates used for variable rate mortgages which means that lifetime mortgages attract a higher rate of interest for consumers as it incorporates the higher risk for providers. In addition, equity release mortgages attract considerably higher sales costs because of the age of consumers and the need to involve family members in the consultation process.
“ The Defaqto report follows the Institute of Actuaries report in January 2005 that estimated the average cost of providing a no negative equity guarantee at 75 basis points per annum. All SHIP members provide this as a cornerstone of its four product guarantees.This has proved immensely popular with clients as it means that no matter what happens to the property market in the future they will never risk losing their home. They are also able to move home in the future and will also receive independent legal advice signed off by certificate.A SHIP logo means peace of mind and the assurance that neither a client nor their beneficiaries will be asked to find money that isn’t available. With increasing speculation about a possible slowdown in the property market, this guarantee takes on an even greater significance in the current market.
“ Dwindling pension funds allied with record growth in the property prices in the last decade and historically low interest rates make equity release an increasingly attractive option for many pensioners.The real value of providing a No Negative Equity Guarantee is that it allows the industry to be proactive. By offering real peace of mind to customers and a guarantee that they will be able to live debt free it helps to promote confidence in the sector and ensure its continued growth.”
EndsFor further information please contact
Fiona Chow/Fran Read/Laura O’Connell at The Wriglesworth Consultancy on 0207 845 7900.
Notes to Editors
The Defaqto Report warned lenders thinking of entering the equity release market and offering a no negative equity guarantee that they risk significant unrecoverable losses and the wrath of irate relatives if they do not have robust actuarial calculations.
About SHIP:
Safe Home Income Plans (SHIP) is the UK’s leading professional body for equity release product providers, representing the interests of its 19 members who provide home income and equity release plans.At present, 90% of the equity release market (in volume terms) is represented by SHIP members. In 1991 SHIP was launched to promote safe schemes. The founder members were Allchurches Life, Hodge Equity Release, Home & Capital Trust and GE Life. Since then SHIP has enabled the home income plan market to expand again. Surveys carried out by member firms point to over 98% of plan holders being happy with their plans.
SHIP is dedicated entirely to the protection of planholders and promotion of safe home income and equity release plans. SHIP’s aim is to reassure the general public that by appointing a SHIP member to represent them they will receive in return the highest level of integrity and service, combined with a fair, straightforward full presentation of their plans. Each SHIP member, is bound by a vigorously enforced Code of Practice and adheres to professional Rules of Conduct. This code has been welcomed by Age Concern.Any scheme endorsed with the SHIP logo will be properly explained and safe.A SHIP plan guarantees that you cannot lose your home – whatever happens to the stock market or interest rates.
SHIP has played a vital role in the development of a safe equity release market in the UK to date and is best placed and committed to leading the market and protecting consumers interests going forward. SHIP’s current 19 members* are:Abbey,Bridgewater Equity Release,Bristol and West Mortgages, Ecclesiastical Life, GE Life, Hodge Equity Release, Home & Capital Trust, In Retirement Services, Just Retirement, Key Retirement Solutions, Mortgage Express, National Counties Building Society, New Life Mortgages, Northern Rock, Norwich Union, Portman Building Society, Prudential, Standard Life, Stroud and Swindon Building Society.