Which Equity Release Companies to Avoid in 2023?

You can spot the equity release companies to avoid in 2023 by identifying the following warning signs:

  • A high number of negative customer reviews (although remember that this is not always a reliable metric, as people are more likely to complain online than to praise)
  • Unethical practices
  • A lack of transparency
  • No regulation by the Financial Conduct Authority (FCA)
  • Non-membership of the Equity Release Council (ERC)

Warning Signs & Reasons to Sidestep Certain Firms

You should sidestep equity release companies with the following warning signs:

  1. Failure to comply with regulatory standards or to obtain accreditations
  2. A notorious reputation or poor track record
  3. High early repayment charges or hidden fees
  4. No No Negative Equity Guarantee or Downsizing Protection clause
  5. The inability to make voluntary interest or partial repayments
  6. The use of high-pressure sales techniques or misleading advertisements
  7. Failure to evaluate your circumstances or financial objectives
  8. Denial of the option to move or transfer your plan

These warning signs indicate that a company may not be acting in your best interests. If you see any of these signs, it is best to avoid the company and seek advice from a qualified financial advisor. 

In the next sections, we’ll take a closer look at why you should avoid certain equity-release companies.

Failure to Comply with Regulatory Standards or Accreditations

It is essential to avoid equity release companies that do not comply with regulatory standards or secure necessary accreditations. Organizations like the Financial Conduct Authority (FCA) and the Equity Release Council (ERC) work to protect consumers and promote ethical practices in the equity release industry.

This is because companies that lack regulation or endorsement are more likely to engage in unethical behaviour, provide poor customer service, or offer inadequate consumer protection.

Financial Conduct Authority Role

The FCA actively protects borrowers in the financial sector, especially those considering equity release products. 

Here are some of the ways the FCA supports equity release borrowers:

  • Regulates providers and brokers to ensure transparency and fairness in operations, and compliance with established rules and principles.
  • Licences financial firms that demonstrate competence and meet specific criteria to maintain their licence.
  • Regularly reviews the practices and financial statuses of regulated firms.
  • Enforces rules, including imposing fines or revoking licences for violations.
  • Offers resources that facilitate informed decision-making on financial products.
  • Resolves disputes between consumers and providers through the Financial Ombudsman Service.
  • Ensures clear information, suitable advice, and fair complaint handling are provided to borrowers.
  • Fosters competition to secure a range of equity release options for consumers.

While the FCA plays a vital role in protecting borrowers, it is also important for you to take steps to protect your interests by understanding the terms of equity release products, seeking professional advice, and making well-informed choices.

>> Check regulated lenders here.

Equity Release Council Role

The Equity Release Council serves as an independent body overseeing the equity release sector in the UK. Its mission is to ensure that all members uphold the highest standards of behaviour and operation.

To safeguard customers in the equity release market, the ERC implements the following strategies:

  • Members must adhere to guidelines that exceed regulatory requirements, providing an extra layer of protection for consumers.
  • The introduction of specific equity release product standards, such as the No Negative Equity Guarantee, promotes financial security for customers.
  • Members are required to seek professional financial advice for their customers, promoting well-informed choices about equity-release products.
  • Customers receive comprehensive and timely information, helping them make informed decisions.
  • The Member Code of Conduct encourages fair dealings, truthful advertising, and top-notch advice.
  • If a company breaches ERC standards, customers have the right to take action, which could lead to disciplinary proceedings.
  • The ERC educates customers about equity-release products and their rights, equipping them to make informed decisions.

While the ERC is a pillar in maintaining standards, you must also actively participate in understanding your financial decisions for utmost protection.

To give you an idea here are some Equity Release Council provider members:

  • More2Life
  • Pure Retirement
  • Canada Life
  • Just Retirement
  • One Family
  • Liverpool Victoria (LV=)
  • Scottish Widows
  • Legal & General
  • Aviva
  • Standard Life
  • Hodge
  • Retirement Bridge Group
  • Responsible Lending

🔒 Pro-Tip: Always choose equity release companies regulated by the Financial Conduct Authority (FCA) to protect yourself from unfair deals and mis selling. Additionally, only consider plans that meet the Equity Release Council’s standards for an extra layer of safety.

Avoid Companies with a Bad Reputation or Poor Track Record.

In the UK equity release market, a tarnished reputation or a history of poor performance is a major red flag. Before choosing a provider, do your research and read customer reviews. Pay close attention to the experiences of others when making your decision.

Here are some signs to look out for:

  • A large number of negative reviews
  • Unresolved complaints
  • A history of unethical practices

If you see any of these signs, it’s best to avoid the company. There are plenty of reputable equity release providers out there, so you don’t have to take risks with your money.

Beware of High Early Repayment Charges or Hidden Fees

High early repayment charges and hidden fees can have a significant impact on your finances, especially if you need to settle your equity release loan early or face unexpected charges.

Choose a company with a transparent and straightforward fee structure. If a company’s fees are not disclosed, it’s a red flag. You should be able to easily understand how much you’ll pay for the equity release loan, including any early repayment charges and other fees.

No Negative Equity Guarantee or Downsizing Protection Clause

If an equity release company does not have a No Negative Equity Guarantee or a Downsizing Protection clause, it is a major red flag. These clauses are essential for protecting your financial assets. 

A No Negative Equity Guarantee ensures that you (or your heirs) will never owe more than your home’s worth, even if the sales proceeds are less than the equity release debt. 

A Downsizing Protection clause gives you the freedom to move to a smaller home and clear the loan without heavy penalties if it’s not possible to transfer your lifetime mortgage to your new home.

🔒 Pro-Tip: Opt for an equity release company that’s part of the Equity Release Council (ERC). This membership ensures you get a No Negative Equity Guarantee, which adds a safety net for your finances. Also, look for plans that include a Downsizing Protection clause, so you can move to a smaller home without harsh penalties if you can’t transfer your lifetime mortgage.

Choosing an Equity Release Company with Flexible Repayment Options

If an equity release company does not offer voluntary interest or partial capital repayments, this is a good reason to avoid it.

It is important to note that having flexible repayment options allows you to manage your loan more effectively and may also reduce the total interest charges.

In March 2022, the Equity Release Council introduced a new standard requiring lenders to offer the option of voluntary loans and interest repayments on all new lifetime mortgages. 

How to Identify High-Pressure Sales Tactics and Deceptive Advertising

Here are some examples of high-pressure sales tactics and deceptive advertising that you may encounter:

  • Time-limited offers. Companies may try to pressure you into deciding by telling you that the offer is only available for a limited time.
  • False promises. Companies may promise you unrealistic returns on your investment or guarantee that you will not lose any money.
  • Scare tactics. Companies may try to scare you into deciding by telling you that equity release is your only option or that you will lose your home if you don’t act now.
  • Misleading information. Companies may provide you with inaccurate or incomplete information about equity-release products or fees.

Here are some tips on how to identify high-pressure sales tactics and deceptive advertising:

  • Be wary of companies that offer unsolicited financial advice. If a company contacts you out of the blue and offers to help you with your equity release needs, it’s a red flag. Reputable companies will not pressure you to decide on the spot.
  • Look for companies that are members of the Equity Release Council. ERC members are required to follow a code of conduct that includes adhering to high ethical standards and providing fair and accurate information to customers.
  • Get everything in writing. Before you sign any contracts, make sure you understand all of the terms and conditions. Be sure to ask questions if you don’t understand something.
  • Don’t be afraid to walk away. If you feel pressured or uncomfortable, don’t be afraid to walk away from the deal.

If you encounter any of these tactics, it is best to avoid the company. Reputable equity release companies will not use high-pressure sales tactics or deceptive advertising.

If you are unsure about a company or its products, it is always best to seek independent financial advice. A financial advisor can help you understand the different types of equity release products available and which one is right for you.

Avoid Equity-Release Companies that Don’t Assess Your Circumstances

Reputable providers will:

  • Listen to your needs
  • Explain the effects of equity release
  • Explore all of your options before recommending a specific plan
  • Tailor their services to meet your specific needs

Denial of the Option to Move or Transfer Your Plan

It is important to choose a company that gives you the freedom to move your plan to a different, suitable property if your circumstances change.

Stay away from companies that restrict your freedom or make it difficult to transfer plans.

How to Protect Yourself from Scams in the Equity Release Sector

To protect yourself from scams in the equity release sector, seek professional advice and understand the terms and conditions of your loan.

Here are some steps you can take to make an informed and confident decision about equity release:

  • Get independent legal advice and work with a qualified equity release broker or advisor.
  • Compare different equity release schemes and providers to find the one that best suits your needs.
  • Check the company’s regulatory status and accreditation to ensure you are adequately protected.
  • Read customer reviews and testimonials to get a feel for others’ experiences with the company.
  • Carefully read and understand the terms of your equity release loan before signing the contract.
  • Be aware of your rights and responsibilities as an equity release customer to ensure a smooth process.

Remember, reputable companies comply with regulatory guidelines and offer transparent and clear terms and conditions, making them a safer choice for equity release.

The Bottom Line

Understanding the risks and red flags in equity release is essential for safeguarding your finances. 

Steer clear of companies that aren’t up to scratch—those lacking proper accreditation or using high-pressure sales tactics. 

On the flip side, aim for transparent providers, have a strong track record, and focus on customer satisfaction. 

A trustworthy broker can add another layer of security to this process. They offer expert advice, compare various plans, and negotiate terms to your benefit, making the whole process more tailored to your needs.

Ready to take the next step? Send us an enquiry. We’ll match you with a reliable broker who can help you find the best equity release product to fit your financial goals.