| How it all began - The first equity release plan was introduced in 1965. Demand existed for a way to borrow money for everyday living costs. Equity release fitted perfectly with the climate at the time as equity release schemes help people who are "house rich" but "cash poor". |
| The first Home Income plan - Allied Dunbar created the first Home Income Plan in 1972. The Home Income Plan was made up of two parts, firstly a fixed rate mortgage and secondly an annuity providing a fixed income for life. |
| Darker days - The introduction of a new style of equity release plan left many elderly people in severe financial difficulties. This lead to the formation of SHIP, Safe Home Income Plans, in 1991 to safeguard consumers against such financial difficulties in future. |
| SAMs (Share appreciation mortgages) - Another damaging blow to the equity release market came in the mid-1990s in the form of share appreciation mortgages (SAMs). Due to the sharp rise in interest rates SAMs left homeowners owing the bank far more than they gained from the initial equity release. Share appreciation mortgages did not comply with SHIP rules. |
| A full house - Norwich Union joined SHIP and create the first schemes allow homeowners to take out a loan on a property in return for a tax-free lump sum. They can choose to receive in smaller chunks this process is known as drawdown. Drawdown mortgages allow homeowners to take out the mortgage and then borrow the money when it is required, enabling the homeowner to draw it down gradually. |
| Market Changes - Over 25,000 lifetime mortgages worth over £1 billion were advanced in 2003, an increase on the previous years figures of 16,300 lifetime mortgages worth around £655 million. A lack of regulation and control continued to over-shadow the equity release sector as its reputation had been tarnished by the mis-sold home income plans in the 1980s. |
| Lifetime mortgage regulation - In 2004 the Government announced that lifetime mortgages would be regulated by the Financial Services Authority (FSA) from 31st October 2004. Regulation of the lifetime mortgage market also gave consumers a point of contact if they needed to complain that they have been mis-advised and have lost out as a consequence of bad advice. |
| The evolution of Home Reversion products - Home Reversion Plans involve sell part of their property in return for tax-free cash, plus a lifetime lease giving the customer and their partner the right to live in the property until they both die or have to move into a nursing home. This is far evolved from the original home income plans offered in 1965. |
| Home reversion plan regulation - April 2007 saw the start of the FSA regulation of home reversion plans, three and a half years after the regulation of lifetime mortgage schemes began. Upon regulation the appeal of home reversion plans increased and a significant jump in applications was recorded in this year. |
| Bad press - Equity Release and Home Reversion Plans still suffer from the stigma created during the darker days when they were not regulated. |
| Beware of sale-and-leaseback schemes - Sale-and-leaseback schemes are not regulated by the FSA, unlike home reversion plans or lifetime mortgages, this means consumers do not have the same rights as they do when taking a regulated form of equity release. |
