Equity release advisers warned over house price predictions
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Equity release advisers making overly ambitious predictions on house price increases risk recommending unsuitable products to consumers, Bridgewater Equity Release has warned.
The provider says too many advisers have been overly bullish on house price predictions, resulting in clients being recommended potentially unsuitable lifetime mortgage products, and is urging advisers to tone down their assumptions.
Peter Welch, head of sales and distribution at Bridgewater, says many equity release advisers quote house price rises of 8% or 9% as the norm for the UK, and therefore recommend lifetime mortgages on the basis that the level of rolled-up interest debt will be less than the increase in the house price.
However, he believes this assumption is based on analysis of periods from the last 40 years when there were considerable wage and inflation increases, whereas in the current economic climate house prices will be flat at best for the next few years.
Welch says: “These false assumptions of house price growth by advisers could spell real difficulty for those clients who are recommended and sold lifetime mortgage products.
“Just over the last few years, given falling house price levels, there will be many customers with lifetime mortgages who will be unable to access any further equity in their properties because their debt levels will have risen and their house value will have fallen, resulting in an increase in their mortgage LTV.
“We would urge all advisers who are overly bullish on house price growth to revisit their own analysis of the situation and to make sure they provide a transparent and unbiased view to clients on where the price of their house is likely to move in the short, medium and long-term.”
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