Beware equity release rogues – they’re just after your data
As £1 BILLION is taken out of homes in just three months, a stark warning . . .
ROGUE firms posing as comparison sites are preying on record numbers of over- 55s rushing to unlock cash from their homes.
Many are convincing homeowners to hand over personal details, such as their phone number, email address and the value of their home, under the guise of helping them to find the best deal.
But, in reality, many are just selling on the customer’s data to the highest bidder, Money Mail has discovered.
Homeowners are then bombarded with marketing calls and emails from salesmen trying to convince them to take out an equity release deal through the adviser who paid for their details.
One industry insider told Money Mail some firms charge third parties as much as £100 for a customer’s data set. Other firms appear to be charging customers direct, by taking a commission on whatever they end up borrowing. This may be in addition to other fees charged by the adviser you end up dealing with.
Equity release loans allow borrowers aged 55 and over to access the wealth tied up in their homes as a tax-free lump sum or a regular income.
The loan does not then have to be repaid until the surviving borrower dies or moves into long-term care.
More than 20,000 equity release customers took a record total of £936 million from their properties in the first three months of this year, according to new industry figures.
Homeowners are now on track to release £5 billion by the end of 2019, according to analysts Mintel.
Lenders are also fuelling the equity release boom by slashing rates, offering larger loans and allowing customers more flexible options.
But, while equity release can be a lifeline for many older borrowers who are property-rich, but cash-poor, experts are warning homeowners to be careful about how they choose a deal.
Mark Gregory, founder and chief executive of independent adviser Equity Release Supermarket, says: ‘ As more older people become comfortable with digital technology, they will naturally use search engines to help them find answers to their questions.
‘But, as equity release is fast becoming a mainstream financial product, unscrupulous businesses are trying to cash in.’
MAny supposed comparison sites promise to provide customers with a personalised quote tailored to their needs.
But, after entering their details, a message flashes up, telling the homeowner to expect a phone call from an adviser who will discuss their options.
Instead of a qualified adviser, however, borrowers are then often contacted by a telesales employee, who offers to give them a ‘free, no- obligation quote’ from an undisclosed panel of lenders.
Deep in the terms and conditions, some firms admit to charging a fee if you proceed.
One says in its small print that its free service introduces customers to ‘selected advisers’ who will offer them ‘preferential rates’. But it adds that it charges customers a fee if they go on to release equity, which is ‘typically less than 2.2 pc of the amount released’.
Often, websites feature lenders’ logos, to give the impression they are on their panel. But some are out- of- date, or the lenders now trade under different names.
Mr Gregory says: ‘ Some firms claim to offer equity release advice and access to the best deals in the market. But the sad reality is that some of these businesses are simply so-called lead generators.
‘Once they have your email and
phone number, they will try to sell your personal information on to the highest bidder. We take a stand against this activity and refuse to buy the information.’
To reassure borrowers that it is safe to give away their details, many sites initially claim they are authorised by watchdog the Financial Conduct Authority ( FCA) when they appear in internet searches. But, if you dig down into the small print on their websites, they admit they are not — and only the lenders who later offer the deals are regulated.
Others are luring new customers with marketing emails that promise households cashback and discount vouchers if they are able to find a cheaper deal elsewhere.
Before sharing your information with any firm, read the small print on its website.
The key to finding the right loan is to source a good adviser who will compare every deal out there for you.
If a company says it deals with qualified advisers, rather than being qualified itself, this is a red flag. To find out if it is a legitimate adviser, check the FCA register ( register.fca.org.uk). Dave Harris, chief executive of More 2 Life, an equity release lender, says: ‘Ask friends and, if you have one, your financial adviser, as they may know an equity release specialist you can trust.
‘Check whether the firm is a member of industry trade body the Equity Release Council. There is a list of members on its website. Always ask for references upfront, and look the company up on sites such as Trustpilot.’
A good adviser will hold your hand through the whole process and warn you of any potential problems. For example, although you can take an equity release deal from the age of 55, the FCA has raised concerns that some homeowners are unlocking cash too early. Interest is calculated monthly and added to the loan, so your debt can quickly grow.
If you took out a loan when you were 55, for example, it may well have doubled by the time you reach the age of 69.
Advisers should also explain the different deals on offer. Many equity release providers now let you pay the interest each month, or clear part of the debt penaltyfree, which can mean you retain more of your housing wealth.
Or, if you do not need to spend all the cash you have unlocked in one go, the adviser should explain that a drawdown mortgage will allow you to take money only when you need it, rather than as a lump sum. Advisers should also always encourage you to talk to your family before taking out an equity release loan. Withdrawing cash from your home today will reduce any inheritance for beneficiaries in your will, so it’s crucial your loved ones are aware of what you are doing.