IFSRA official "warning" on home equity release?

Why has IFSRA seen fit to issue an official "warning" on Home Equity Release Schemes this week? Home Equity Release firms are reportedly taken aback at their regulators language. Weren't these supposed to be a welcome development? If these are legitimate offerings from legitimate firms that follow worldwide practices do they have a case for complaint against IFSRA for damaging their standing? Covered on P.Kenny Friday and M.Finucane yesterday, can't do the links sorry.

Re: Official "Warning" on Home Equity Release?

I don't see any harm in warning people that the interest payable on such loans is quite high and that there are alternative strategies for realising cash from your home.

Re: Official "Warning" on Home Equity Release?

I'm a little bemused at the extremely bad press these products have gotten recently.

Firstly, let me point out that I have no connection with any of these companies and I have never sold or advised anyone about them.

From what I've seen these are interest-only loans that can be used by people who have a substantial ppr but very little income.

Much was made of the fact that the amount borrowed will have doubled after 10 years, but isn't that just the effect of compound interest?

The interest rate on one of the sites I looked at was 6.48% - this is a bit steep with base interest rates at 3.5%. However if the interest rates were lower, would this type of lending then be thought of as a good idea? If this is the case why isn't the outcry simply '...the rates are too high..' rather than saying that they are bad products, full stop?

Of course no one wants to be in the situation where they have to borrow money at that stage in their lives but, if someone finds themselves short of income, isn't this type of product preferable to living miserably and leaving a fortune to your next-of-kin (who presumably wouldn't help you out when you were alive!)?

Re: Official "Warning" on Home Equity Release?

From what I gather the criticism is on the radio ads, eg stating that no mortgage repayments are necessary but not stating that rates are high relative to normal rates and that debt doubles every ten years. But if this is the case why does IFSRA not intervene in the background rather than the foreground? Is there something else happening? It seems rather curious.

Re: Official "Warning" on Home Equity Release?

Eddie Hobbs was on the radio at the weekend criticising these products but I couldn't really figure out his main points of criticism clouded, as they were, by the usual invective and sarcasm. One thing he objected to was the fact that one of these companies had a picture of a good looking elderly couple seemingly on a cruise when, he claimed, most of these loans are actually used for debt consolidation.

Re: Official "Warning" on Home Equity Release?

Found the link here, Saturday about halfways through.http://www.rte.ie/radio1/marianfinucane/. Sounds more like a reasoned debate to me with somebody from an Equity release company, two companies I think. The tax relief on income transfers to retired parents is a bit left of field, no pun intended. I thought the equity release guy stood up well (even if he did sound a bit slick).

OK - maybe it's my fault because I just tend to switch off when EH speaks.