Charting the story of reversion plans

In the mid-1960s when equity release first appeared in a formalised way in the UK, it was all about clients using their property to make ends meet.

This meant transferring ownership of a property to a provider in return for an income for life.

In a way it was an alternative to a Hancock Annuity, but with the money coming from clients’ assets, which of course meant their house.

The reversion scheme was born and in the years that followed the industry saw many adaptations. The most significant perhaps was the packaging of the property with a formal life annuity provided by an insurance group.

In recent years the popularity of this product has waned significantly, not least because of the improved LTVs which are now available from lifetime mortgages.

This is particularly the case when a client has health or lifestyle issues that can improve the amount of cash available.

In practical terms clients aged 60 can now get almost 40% LTV compared with what would have been regarded as a normal 20% only a few years ago.

Reversions may well see a renaissance in years to come particularly if property prices go into long-term decline, which seems unlikely.

In the meantime brokers will often find clients the solution they seek via impaired terms.