SHIP predicts an equity release boom after N4

Safe Home Income Plans chairman Jon King is predicting that many more IFAs will enter the lifetime mortgage market from October when it falls under the FSA regime.

Speaking at a Prudential round table discussion on equity release last Wednesday, King said IFAs will feel more confident in getting involved in what is seen a complex area once they have the comfort of regulation.

Prudential says it is likely to expand the number of IFAs it distributes its equity release product through after N4. It currently only deals with Premier Mortgage Services members.

King says: “Ten years ago equity release was a cottage industry but is now quite mainstream. More IFAs, including traditional mortgage IFAs, will be happy to sell equity release after October, although I am not sure it will become as big as some suggest.”

Consumers also want regulation with 46% of people aged over 55 surveyed by Prudential saying it will make them more likely to consider equity release.

But King warns if the Treasury does not change its stance on home reversion schemes, which are not going to be regulated by the FSA, that side of the market could be wiped out. The size of the home reversion market is already shrinking with SHIP saying its value dropped to £129m in 2003 from over £200m the previous year.

King says: “It&#39s a topsy-turvy world with no balance if reversions are not regulated.”

Pru spokesman James Murray adds: “It&#39s odd when even Prudential is calling for regulation.”

Research unveiled by the Pru at the event revealed that retired homeowners have up to £693bn of equity tied up in their home – around 66% of their total wealth. It estimates that households need £18,000 a year to retire comfortably but currently have only £14,000.