This ‘Apples and Oranges’ debate is something I have covered before, but the issue seems to have only intensified in recent months and a new, worrying and even more inappropriate comparison has recently reared its ugly head – Shared Appreciation Mortgages.
I spotted Shared Appreciation Mortgages mentioned in relation to equity release in an article in a major national newspaper earlier this year. The section concerning SAMs was tactically placed in its own stand-alone text box but was still on the same page as a broader article explaining how the cost of equity release was falling. To the layperson this section on SAMs could easily have been confused as being part of the article concerning equity release, and this was probably the goal.
With a classically sensationalist headline – ‘Trapped in our home’ – any reader would not be blamed for raising an eyebrow and casting modern day equity release in with SAMs. It is regrettable that tabloid journalism is insistent on combining a positive news story – i.e. the cost of equity release falling – with one that is inappropriate, irrelevant and out-dated. But, as they say, live and let live; one solitary slip up from the media - be it intentional or not - can be forgiven. So imagine my horror whilst leafing through a different national newspaper (I try to change it up) I see another article explaining how, 'equity release is becoming an increasingly popular option for an alternative retirement income', I spot another stand-alone text box, another sensationalist headline and another case study about SAMs!
SAMs were a peripheral product offered by just two lenders over 15 years ago with approximately just over 15000 sold, and, in terms of their mechanics, have very little in common with the modern lifetime mortgage. However at the time house prices were decreasing and the proposition looked reasonable. What then happened was bad news for those who had chosen to opt for a SAM. House prices suddenly rocketed leaving many homeowners stranded once they had handed over the usual 75% of the appreciation. What on the face of it looked like a good solution forcash strapped retirees turned out to be a very expensive option. However the industry learnt from the experience.
Now, some 15 or more years later, comparisons between equity release and SAMs seem veryinappropriate to me. If they are to continue in the press, customers may not get the fair and balanced view of equity release that they must receive. With an increasing amount of people turning to lifetime mortgages and extensive safeguards developed over the last 20 years, along with FCA regulation, it’s a shame that some parts of the media feel the need to ‘balance’ these stories with something negative and no longer relevant.
To intensify the continued success of the equity release industry we should all ensure we keep in mind what the customers best interests are making clear the risks and thoroughly assessing the suitability of products for individual circumstances. We need to strive to make equity release and lending in retirement become mainstream. With an ageing population who are controlling huge amounts of housing wealth –an estimated £1 trillion for the over 60s – products like the lifetime mortgage, and any other modernisation our industry may design in future years will become more useful and possibly essential to the financial comfort of the growing elderly population.
Maintaining professional and sound advice, continuing product development coupled with reviewingand further developing appropriate safeguards where applicablewill all will help the industry to continue to grow whilst providing customers with the opportunity to see the benefits of converting housing wealth in a clearer light.
