113/03
11 November 2003
HOME REVERSION PLANS CONSULTATION PAPER PUBLISHED
The Treasury today published a consultation document seeking views on whether the sale of home reversion plans should be regulated by the Financial Services Authority (FSA).
Announcing publication of the consultation document, Financial Secretary Ruth Kelly said:
“The target market for home reversion plans tends to be elderly people who have paid off their mortgage. Whilst informal discussions with stakeholders have provided no evidence of consumer detriment, the market is growing rapidly. It is therefore sensible to consult now on whether the sale of such plans should come within the scope of regulation by the FSA.
“The purpose of the consultation is to arrive at a more in depth analysis of the costs and benefits of regulation. We are seeking information on the wider equity release market and any evidence of consumer detriment in the selling of reversion plans, as well as views on the possible impact of regulation.”
The consultation period extends until 31 January 2004.
NOTES FOR EDITORS
1. Chief Secretary Paul Boateng announced on 5 June 2003 that the Government would hold an open consultation on the regulation of home reversion schemes (Ministerial Written Statement Hansard 34-35 WS). Home Reversion schemes enable homeowners to release equity in their property, usually in exchange for a lump sum or an assured income. The target market for such products tends to be elderly people seeking to boost their income in retirement.
2. Copies of the consultation document ‘Regulating Home Reversion Plans’ are available from (and responses should be sent to) :
Mark Baldwin
Room 4 W2
HM Treasury
1 Horse Guards Road
London
SW1A 2HQ
Tel: 020 7270 5513
Fax: 020 7270 4696
e-mail: mark.baldwin@hm-treasury.gsi.gov.uk
The document is also available on the Treasury website.
3. There are two types of equity release scheme :
- home reversion equity release plans
Where the homeowner agrees to sell all or part of their home in return for a lump sum payment and the right to remain in the house until they die or move home, when the home reversion provider is free to sell the property.
- mortgage backed equity release plans
Where the homeowner takes out a loan secured against their property. The loan is used to provide a regular income or provide a lump sum payment. Ownership remains with the homeowner and the loan is repaid when the property is sold either on death of the owner or if they move house.
4. Mortgage backed equity release schemes will be regulated from October 2004 when the FSA takes on responsibility for regulating mortgages. Current legislation does not provide for home reversion plans to be brought into FSA regulation. The consultation announced today seeks information and views on whether this is desirable.
5. The trade body Safe Home Income Plans (SHIP) estimates that the combined market for equity release and home reversion products in 2002 was £852 million. Home reversion schemes are estimated to account for roughly a quarter of this.
6. Media enquires should be addressed to Simon Moyse in the Treasury press office on 020 7270 4420.
7. Non-media enquiries should be addressed to the Treasury Public Enquiry Unit on 020 7270 4558.
8. This press release and other Treasury publications and information are available on the Treasury website. If you would like Treasury press releases to be sent to you automatically by e-mail you can subscribe to this service from the press release site on the website.