Economic Lifestyle is challenging other equity release providers to improve the terms and conditions of their products as it launches its cash release plan, a fully portable and flexible reversion scheme available for customers aged 60 and over.
The retirement housing and finance specialist believes poor sales of reversion plans in comparison with lifetime mortgage schemes is partly due to the inflexibility of existing products and has designed its cash release plan to offer customers a better deal.
Recent figures show sales of reversion plans currently make up just 6% of all money released through equity release schemes with lifetime mortgage products dominating the market. Economics scheme which is available direct and through independent financial advisers, offers customers a wider range of choices than many reversion plans and lifetime mortgages currently on the market.
Reversion schemes allow homeowners to sell all or part of their property to a provider in return for a cash lump sum or monthly staged payment or a combination of both.
Economics scheme allows homeowners to take the income in a structured payment plan and will pay 6% annual interest on cash that has not been drawn down. They will also benefit from any rises in the value of their house if they opt to extend an existing plan having already released part of the equity.
Crucially the plan is fully portable and can be transferred to another property if they want or need to move home having taken out a scheme. There are no application fees and customers are only charged a valuation fee which is fully refundable on completion.
Mark Neal, managing director at Economic, says: Sales of reversion schemes have been poor and we believe this must to some extent be because the current plans on the market do not meet customers expectations.
Our cash release plan is designed to address issues of flexibility and portability so that retired homeowners can take out a product which genuinely meets their needs. Paying 6% interest on cash that has not been drawn down is in our opinion, simply a matter of fairness as retired homeowners need to know that they are getting as good a deal as possible.
The amount of cash released via equity release schemes in the three months to September 30 was 293m, says Safe Home Income Plans. Just 17m of the total was released through reversion. Economic believes its scheme is the only one available to customers aged 60 or over. Most other schemes on the market are restricted to those aged 65-plus. Financial advisers selling the cash release plan earn fees of 3% of the initial advance.
Economic also offers homeowners a variety of retirement homes, which benefit from a range of security features. In addition to this, it offers retired homeowners a number of other options for releasing some of the equity in their homes or to live in a property that they would not normally be able to afford.