Equity Release - action groups

DavidWalls

Does anyone know if there are any campaigning groups that help address the rip off Equity Release? My parents signed a deal 15+ years ago at a fixed rate of 8%. Effectively, they've sold their home for £35k. 

What an utterly wretched product. As bad as Payday Loans and the PPI scandal. 

eskbanker

What did you think about the responses to the thread you started a year ago about this?

https://forums.moneysavingexpert.com/discussion/6329758/equity-release-claims-disputes

In particular, what would support a conclusion that there was any mis-selling?

Perhaps worth reading up background info on the likes of:

https://www.financial-ombudsman.org.uk/businesses/complaints-deal/mortgages/equity-release
https://www.fca.org.uk/publications/multi-firm-reviews/equity-release-sales-and-advice-process-key-findings
https://www.ageuk.org.uk/globalassets/age-uk/documents/factsheets/fs65_equity_release_fcs.pdf

Undervalued

DavidWalls said:

Does anyone know if there are any campaigning groups that help address the rip off Equity Release? My parents signed a deal 15+ years ago at a fixed rate of 8%. Effectively, they've sold their home for £35k. 

What an utterly wretched product. As bad as Payday Loans and the PPI scandal. 

How did they "effectively" sell for £35K.

Surely, if they live to be a ripe old age it will keep paying until the day they die? In which case they will benefit long term? To some extent that is what you are buying like an annuity. If you die young you (or rather your beneficiaries) lose out?

But yes any interest that is added to the debt compounds rapidly that is why, obviously dependent on age, you are only able make use of something around a third of the property's value in many cases.

Aylesbury_Duck

DavidWalls said:

Does anyone know if there are any campaigning groups that help address the rip off Equity Release? My parents signed a deal 15+ years ago at a fixed rate of 8%. Effectively, they've sold their home for £35k. 

What an utterly wretched product. As bad as Payday Loans and the PPI scandal. 

No, I'm not aware of any campaign groups.

Where's the rip-off?  Are you suggesting it was mis-sold? Presumably they entered into an agreement they were happy with at the time and have benefitted from the capital release payments since then.  Is this a case of buyer's remorse with the knowledge of what actually happened to house prices and interest rates over the last 15+ years?  If it is, then your parents have no case at all.  If they have evidence to suggest the product was mis-sold, then their first complaint should be to the service provider.  If that results in deadlock, then it's off to the ombudsman.

It's very different to payday loans and PPI.  Those are products negligently sold to people without checking they have the means to repay or the need for the product.  Your parents presumably needed to release equity from their house?

Out of interest, what did they pay for the house?  

DullGreyGuy

Undervalued said:

DavidWalls said:

Does anyone know if there are any campaigning groups that help address the rip off Equity Release? My parents signed a deal 15+ years ago at a fixed rate of 8%. Effectively, they've sold their home for £35k. 

What an utterly wretched product. As bad as Payday Loans and the PPI scandal. 

How did they "effectively" sell for £35K.

Surely, if they live to be a ripe old age it will keep paying until the day they die? In which case they will benefit long term? To some extent that is what you are buying like an annuity. If you die young you (or rather your beneficiaries) lose out?

But yes any interest that is added to the debt compounds rapidly that is why, obviously dependent on age, you are only able make use of something around a third of the property's value in many cases.

I am assuming they got a lump sum equity release loan/lifetime mortgage so

£35,000 paid up front to them to do what they want with
No repayments to the lender whilst they live in the house
Fixed 8% interest being added
When they die or go into long term care the full loan has to be repaid from the estate/property
Most cap the loan amount at the value of the property so the estate cannot go into negative equity

Its not really like any annuity at all from the debtors view as its a one off payment. From an insurer (most of the lenders are) view point there is a longevity risk as with annuities because the repayable debt may exceed the value of the property and so the return is below prediction. 

Keep_pedalling

Why not be honest, what you are really angry about is the loss of your inheritance.

Undervalued

DullGreyGuy said:

Undervalued said:

DavidWalls said:

Does anyone know if there are any campaigning groups that help address the rip off Equity Release? My parents signed a deal 15+ years ago at a fixed rate of 8%. Effectively, they've sold their home for £35k. 

What an utterly wretched product. As bad as Payday Loans and the PPI scandal. 

How did they "effectively" sell for £35K.

Surely, if they live to be a ripe old age it will keep paying until the day they die? In which case they will benefit long term? To some extent that is what you are buying like an annuity. If you die young you (or rather your beneficiaries) lose out?

But yes any interest that is added to the debt compounds rapidly that is why, obviously dependent on age, you are only able make use of something around a third of the property's value in many cases.

I am assuming they got a lump sum equity release loan/lifetime mortgage so

£35,000 paid up front to them to do what they want with
No repayments to the lender whilst they live in the house
Fixed 8% interest being added
When they die or go into long term care the full loan has to be repaid from the estate/property
Most cap the loan amount at the value of the property so the estate cannot go into negative equity

Its not really like any annuity at all from the debtors view as its a one off payment. From an insurer (most of the lenders are) view point there is a longevity risk as with annuities because the repayable debt may exceed the value of the property and so the return is below prediction. 

You may be right.

However even so if they live to a ripe old age the company won't get their capital back until the second parent dies or goes into long term care. That could be perhaps 30 or 40 years. 8% compound added to £35K for 30 to 40 years may well be far in excess of the value of the house. As you suggest this is the element of gamble

MattMattMattUK

DavidWalls said:

Does anyone know if there are any campaigning groups that help address the rip off Equity Release? My parents signed a deal 15+ years ago at a fixed rate of 8%. Effectively, they've sold their home for £35k. 

What an utterly wretched product. As bad as Payday Loans and the PPI scandal. 

People signed up in full knowledge of what they were signing up to and how the product worked. The power of compound interest is well known and so over 15+ years it's impact was going to be obvious. What kind of "action" do you expect to be taken?

km1500

I suspect a lot if people don't really understand the damage that can be done by compound interest.

HillStreetBlues

MattMattMattUK said:

People signed up in full knowledge of what they were signing up to and how the product worked. The power of compound interest is well known and so over 15+ years it's impact was going to be obvious. What kind of "action" do you expect to be taken?

That's too general. There will be people that won't have understood the full ramifications.
That's why everyone should take independent  advice of taking out those kind of products, sadly not everyone does.

Aylesbury_Duck

MattMattMattUK said:

DavidWalls said:

Does anyone know if there are any campaigning groups that help address the rip off Equity Release? My parents signed a deal 15+ years ago at a fixed rate of 8%. Effectively, they've sold their home for £35k. 

What an utterly wretched product. As bad as Payday Loans and the PPI scandal. 

People signed up in full knowledge of what they were signing up to and how the product worked. The power of compound interest is well known and so over 15+ years it's impact was going to be obvious. What kind of "action" do you expect to be taken?

Presumably a retrospective application of interest rates over the last 15+ years and a re-assessment of property value.

It would be a lovely precedent to apply to my savings, investments, mortgages, investments and insurances over the last few decades.  I could be owed thousands!  Is there an action group for the fixed rate mortgage I was sold in 1997 that turned out to be a pup because rates fell as soon as it was signed?  And that life insurance I took out at the time is still going, it's been useless because I'm still here.