SLC and BLG Spring Roadshows

Equity Release Council

Summary of Session

• History and growth of the equity release sector

• Influencing factors

• The Role of Independent Legal Advice

• Guidance for Legal Advisors

• Q&A

2018

+25 years after SHIP

launched - 400,000

consumers have taken

out a plan from Council

members, £20bn

released

1965

First equity

release plan

(typical

house value

£4,000)

1991Formation

of Safe

Home

Income

Plans

(SHIP)

1992

SHIP 1st

year, 500

applications,

£28m

released

1999

First ‘Roll-

Up’ plan

introduced

2001

First

‘Drawdown’

plan

2004

FSA regulate

Lifetime

Mortgages

2007

FSA regulate

Home

Reversion

plans

2012

Equity Release

Council

formed

2014

FCA take over

regulation of ER

sector

Equity Release: History and Growth

Council safeguards complement regulation

• FSCS• Advice standards• Qualifications

No negative equity guarantee

Freedom to move to a suitable property

Tenure for life

Independent legal advice

The Council Safeguards ensure:

Where we are today

Bi-Annual Market Report

Equity release lending reaches a record breaking £3.06bn in 2017

• Equity release attracting twice as many new customers as five years ago

• Lifetime lending sees fastest growth within overall mortgage market for a second year

• Range of equity release product options grows 25% year-on-year

• Older customers increase their share of new plans agreed across drawdown and lump sum products

66,698 new or returning customers served last year

Source: Equity Release Council

229 member firms with 710 individuals registered (20 member firms in 2012)

86 product options with growing flexibilities (17 in summer 2012)

£3.06bn annual lending activity (£925m in 2012)

37,037 new customers (17,706 in 2012)

A fast-expanding sector…

- Q1 2018 rises by 25% to £870m (+£4bn year end?)

Source: ONS and ‘Equity release rebooted’ white paper, April 2017

People are living longer37% of people will be aged 55+ by 2045 (currently 30%)

25% will be aged 65+ (currently 18%)

People are working longerOver 10 million over-50s are currently in work, a record high

Pension incomes are changingFuture DC pensioners with 8% contributions can expect

a pension worth only 15% of their final salary

This is only one fifth of the pension of an identical worker in a DB scheme

Housing equity is growingHomeowner equity in England reached £2.6 trillion in 2016

£1.8 trillion belonged to households aged 55+, an amount forecast to double by 2036

… working to meet increasing consumer needs

The way ahead

…with all of its challenges

Source: Equity Release Council member survey, summer 2017. Views do not necessarily represent those of The Council.

• Evolving Government and regulatory policy

• Changing social care needs

• Intergenerational wealth distribution

• Inheritance tax treatment

• Ageing and capacity

….will increasingly need the support of the legal profession – demand is already high

Equilaw – who we are and what we do

Multiple Award Winning Service

• Founded by Claire Barker in 2001

• We are equity release experts – it’s all we do

• 8 teams based at our Gloucester office

• Full coverage throughout England and Wales

• In house Technical Team – Conveyancing,

nonstandard cases & title issues

The role of independent legal adviceEquity Release Council – Rule 8: the requirement for independent legal advice is a key feature

for consumer protection. The Advising Solicitor must sign a certificate confirming they have:

✓ Prepared a written report particular to the product, advising on the risks and rewards

✓ Ensured – so far as reasonably possible - that the client is not under duress

✓ Checked that the client has sufficient mental capacity

✓ Verified the identity of the client

➢ The client should be properly advised upon the nature of a lifetime mortgage.

➢ To satisfy the lender, the legal advisor will also need to check the title, ensuring that it is

suitable for the requirements of an equity release lender and remedying any issues or defects.

Equity Release & Related Transactions

To synchronise an equity release mortgage with a related transaction, the legal advisor will need to

liaise with the lender’s solicitors in order to satisfy their additional requirements. The lender will

consider the property from a re-sale point of view and so title investigations are more onerous.

When might you encounter an equity release mortgage in the course of

your day to day business?

• Purchase of a new property: residential and buy to let

• Repayment of debts – insolvency

• Payment to an ex partner/spouse pursuant to a financial settlement

• Inheritance & Trusts – ‘buying out’ beneficiaries

• Lease extensions and purchase of freehold interest

• Gifting to (grand)children for house deposits

Satisfying the lender’s solicitorsAll equity release lenders are represented by a firm of solicitors: how does this impact upon transactions?

• UK Finance Mortgage Lenders Handbook

• A risk based approach vs. taking a view

• Turnaround times

• Additional paperwork

• Set procedures

We need to balance the above with shorter offer periods and in some cases, limited periods of fixed interest rates on offers.

Satisfying the lender’s solicitors

The below examples should give you a flavour of some typical requirements:

• Title entries: no third party may have an interest

• Transferors: some lenders will insist that a transferor assigning their interest to your client must obtain legal advice

• Financial Settlements may need to be interrogated / approved

• Occupier’s Consent Deeds must usually be signed with an Independent Legal Advisor

• Applications by a Power of Attorney must be scrutinised as to use of funds

• Applications where the Property is not in the borrower’s name may be ‘treated like a purchase’

• A lender will be an active third party in purchase cases

• Home Reversion Plans will attract different requirements

Guidance for a smooth transaction

• If you encounter an equity release mortgage during a conveyancing

transaction, consider whether you want to advise on the mortgage. If

not, you may wish to refer that element to a specialist firm but retain

the conveyancing.

• Remember the lender’s solicitor’s may have additional criteria.

• Accept that the lender’s solicitors will not deviate from their

requirements.

• Beware short offer dates when juggling the elements of the case.

Q&A Thank you

In the changing retirement landscape, customer demand for equity release has never been stronger and is only set to increase. We’re proud to be working with the Equity Release Council who provide a much-needed central hub of

information and support to all involved in this fast-growing market, keeping products and processes safe, relevant and fit for purpose for those who are turning to them for financial support.

Paul Carter, CEO, Pure Retirement

“Our membership of the Equity Release Council supports its efforts to develop and maintain an appropriate set of rules and principles for the equity release sector, ensuring the market is one that works professionally and grows

safely in the interest of customers.”Steve Kyle, Group Regulatory & Audit Director, Just Group

“The Equity Release Council plays a pivotal role in helping to ensure the market is safe and reliable for consumers.”Julian Knight MP for Solihull