The Care Options in Retirement guide argues that using equity release as a means of additional retirement income may end up making borrowers worse off.
Phillip Spiers, co-author of the guide, says: “If circumstances change, borrowers may not have enough money remaining to fund alternative accommodation, and money received through equity release may seriously alter the amount of benefits they are able to collect.
“Anyone considering equity release should do so cautiously and only after exhausting all other options.”
Which? says consumers should be wary, as those wanting to move into retirement homes may have to repay some of their loans earlier than expected and there can be high charges for early repayment.
Dean Mirfin, business development director at Key Retirement Solutions, says: “The guide makes sweeping statements about the way benefits are affected by equity release.
“There is a requirement under the regulations that any potential effect on benefits has to be considered, whether this is done at the point of sale or by referring clients to the Citizens Advice Bureau or the Department of Work and Pensions.”
He adds there is also an increasing number of providers that cater for changing circumstances, such as clients going into residential care.
Andrea Rozario, director-general of Safe Home Income Plans, says: “The guide is outdated and hasn’t taken into account the built-in flexibility that equity release products now offer.
“Also it doesn’t take into consideration the value for money that equity release offers. If you compare normal SVRs to fixed rates available with equity release, you can see they offer good value for money.”