FSA issues warning on no cost property income plans
Share
The Financial Services Authority has warned consumers who are considering using their property to generate an income to be cautious about products that offer a no cost way of doing this.
It says one such product offering to do this is called Crossroads, offered by Asset Income Plan.
The regulator says promotional material it has seen claims that the product pays homeowners an annual income of 5% based on 50% of the value of their property for a set period of time – three and ten year periods have been mentioned.
It says that to receive this income, the homeowner must allow an insurance company to take a legal charge on their property up to a maximum of 50% of its value.
The product information states that the only risk to the borrower of having to sell their home would be if the insurance company became insolvent and that this is reduced because the product is covered by capital risk insurance.
But the FSA says it is not clear if this is correct and whatever steps may be taken to reduce the likelihood of the firm carrying this out and the home may still be at risk.
The FSA says: “The product information explains that Crossroads is not regulated under our rules. This might mean that its advisers and providers do not need to be authorised by us, although there is not enough information currently to confirm that.
“But, if it is correct, you will not be covered under the Financial Services Compensation Scheme or be able to take any complaint to the Financial Ombudsman Service.”
If you enjoyed this article, sign up here to receive daily email updates from Mortgage Strategy and Follow @mortgagestrat
