More than half of Britons do not have a clue what equity release actually is, according to the latest research from Norwich Union, the market-leading provider in the equity release sector.
In a survey of more than 1,000 adults, eight in 10 consumers did not know the age they were eligible for equity release, whilst a fifth thought that they could take out a policy from the age of just 18.
To combat this incomprehension, Norwich Union has launched an informative film (available in VHS or DVD format) to educate consumers about equity release.
Norwich Union further probed consumers to determine their level of understanding:
Lack of product knowledge
The products themselves were a mystery to consumers, with a third wrongly believing that they would have to make monthly repayments if they took out a policy. 38% did not realise that an equity release policy could affect their state benefit entitlement, whilst a further 18% thought that they would have to sell up should their partner pass away.
Misunderstanding of tax implications
The issue of tax and equity release seemed to baffle most consumers questioned. A third of respondents did not know that an equity release plan could reduce their inheritance tax liabilities, whilst a further 32% incorrectly thought that tax would be payable on the monies released from their property.
Shockingly, 17% of respondents did not realise that equity release could affect the amount they may leave to their dependents.
Product protection ignorance
28% of consumers did not know that equity release products are regulated by the FSA and thought that they would have no protection if they took out a policy. A further 36% did not know that most plans meant they would be protected from negative equity in the event of a downturn in the housing market.
When seeking information on equity release, almost three quarters of consumers would speak to an independent financial adviser. Two thirds would speak to their bank or building society whilst almost half would turn to the yellow pages or the Internet to find further information. 45% of consumers would seek advice from a specialist company about equity release whilst family and friends were also a port of call for many. A further 40% would choose a mortgage broker for equity release advice.
Elizabeth Boardall, head of marketing, Norwich Union Post Retirement Products comments: "It is worrying to find that so many people are unaware of the basics of equity release when this may be a viable option for many approaching retirement. The fact that many consumers assume it is something they can have from the age of just 18 further strengthens the case for a drive in educating the Great British public. Providers and intermediaries alike have a role to play in ensuring that consumers fully understand the products available and the options open to them."
Norwich Union has launched an educational equity release DVD and VHS available to consumers. To request a copy consumers can call 0800 404 7137.
Norwich Union explanation of Equity release:
- Equity release is a way of releasing money from your home.
- The minimum age you would be eligible for an equity release product is 55.
There are two core types of equity release product available:
- A lifetime mortgage is a loan secured against your home where the loan and interest are rolled up and usually repaid when the homeowner dies or goes into long term care.
- A home reversion plan enables a homeowner to sell part or their entire home in return for a lump sum.
- There are no monthly repayments with an equity release policy.
- Taking out an equity release plan could affect your state benefits.
- If your spouse dies, you would not have to sell your home if you have an equity release scheme.