The ‘no negative equity guarantee’ is an important feature of modern equity release plans, giving borrowers confidence when they use equity release to generate some cash from their property in retirement. It’s a feature included at no extra cost to the borrower, ensuring that the debt never exceeds the current value of the property. This is important because it means, when the borrower dies, their beneficiaries don’t inherit any debt. But according to a new report, the equity release sector could be in deep trouble after undervaluing their no negative equity guarantees.
Has the equity release sector undervalued its guarantees?
This 639 word blog post looks at a new report from the Adam Smith Institute – “Asleep at the Wheel: The Prudential Regulation Authority and the Equity Release Sector” – which is critical of the regulation of the sector, allowing for the undervaluing of the no negative equity guarantee offered by providers. Written on 7th August 2018.