What’s the Equity Release Council & What Does it Do?
The Equity Release Council is an organisation that seeks to monitor the equity release scheme in the UK to ensure it is as safe as possible.
It was created in 1991 to help combat the amount of scams that were taking place with equity release, and to ensure the scheme was as flexible as possible.
This does not mean that everyone who partakes in equity release will be supported by the Equity Release Council, as you have to specifically select advisers, solicitors, and lenders who are members of the ERC if you want to benefit from their services.
However, we recommend that all of our clients do this, as it ensures they will have the best experience of equity release possible, as opposed to being conned by an unreliable lender or missing out on excellent benefits such as downsizing protection.
What are the Equity Release Council’s Values?
Firstly, this organisation claims to be authoritative. This means they focus on ‘evidence-led market insights’, so instead of taking anecdotal stories of equity release and running with them, they perform detailed research into how the scheme is working (1).
Secondly, the Equity Release Council professes to be progressive. This means they are always looking into ways in which equity release could be improved, and coming up with innovative solutions.
Next, this organisation claims to be incisive. This means they are committed to analytical decision-making.
Finally, the Equity Release Council is trustworthy. They hope to be a reliable organisation that both lenders and consumers can depend on when they get involved with equity release.
What is the Equity Release Council’s Mission?
The Equity Release Council wants to raise awareness of equity release to ensure homeowners know what they are getting into when they choose to take out equity.
They also want to ensure they are aware of all the options available to them when it comes to spending their equity loan, including helping out loved ones and funding care costs in later life.
Another aspect of the Equity Release Council’s mission is to provide more flexibility to equity release consumers. For example, they may contribute to the creation of new equity release plans that give consumers more of a choice when it comes to releasing equity.
What is the Equity Release Council’s Statement of Principles?
All ERC members must follow the ERC’s Statement of Principles.
Principle 1
The first principle is to act in utmost good faith, meaning members should always ensure they offer reliability to their clients, and that they are fair in their dealings with clients.
Principle 2
The second principle is that ERC members must deal with conflict as quickly and fairly as they can. This would include complaints, as equity release consumers are encouraged to first complain to their lender, and only escalate this to the ERC if necessary.
Principle 3
The third principle is to ensure equity release consumers have suitable outcomes throughout the duration of the equity release scheme.
Principle 4
Finally, the fourth principle is that ERC members must portray equity release in a positive light through their actions, rather than ruining the reputation of the scheme.
What is the Equity Release Council’s Code of Conduct?
The ERC also has a code of conduct that its members must follow. This is the current code of conduct:
- Encourages acting in good faith at all times
- Communicates high expectations and good practices for the outcomes of equity release plans
- Seeks to encourage public trust in equity release as a viable retirement alternative
How Do You Become a Member of the Equity Release Council?
In order for an equity release company to be approved by the Equity Release Council, they must submit an application to the ERC that proves they fit in with the official Statement of Principles and the Required Customer Outcomes, and that they are willing to stick to the Rules and Guidance.
Each year, on the date that the application was approved, the ERC will review the membership of the equity release company. The company is also expected to submit an annual certificate of compliance.
Why is Equity Release Better With the Equity Release Council?
Below we outline why equity release is more favourable to consumers thanks to the Equity Release Council:
Firstly, if you release equity with members of the Equity Release Council, you will always be able to move home while you are on the scheme, which is sometimes known as downsizing protection. You would repay the rest of your equity loan without being charged an early repayment fee (2).
If your lender is not an ERC member, they may charge you to move home, or they may even not allow you to move home. This is because they made an agreement to offer you a loan based on the value of your property, and they may not want you to change to a new property.
An ERC member will have to approve you moving home, but you would not be able to move into any home. The property would have to suit the regulations of the lender, including its size, value, condition, and location.
Even so, you are offered much more flexibility by ERC members in being permitted to move home. This is incredibly important if your situation changes significantly, such as if you need to receive care from family members, you need to provide childcare for your children, or you are experiencing stress living in the city and you want to move to the countryside.
Secondly, you are allowed to stay in your current property for the rest of your life if you are with an ERC lender. They will never force you out of your home, which means you can enjoy your equity loan whilst having the stability of remaining in the same home.
This is great news for people who have lived in their property for many years and are not interested in moving, people who would not have the energy to move, or people who are living in their current property for particular reasons e.g. wanting to be close to their loved ones or having a home that is already equipped for retirement.
Next, your interest rate will often be fixed when you are with an ERC lender, which is positive as you do not have to worry about an unexpected rise in interest rates that would result in you being in more debt. If the interest rate is variable, it will be capped at a certain percentage of the loan, so there will still be some stability.
This is reassuring for people who are worried about compound interest with equity release. Though it does not have to be repaid, it can still be concerning to owe so much interest, so it is preferable for the interest rate to either be fixed or capped.
The ERC also requires its members to offer a no negative equity guarantee to its customers. This means that no matter how much the customer’s property drops in value, they will never have to pay back more than they borrowed from the lender.
This makes equity release extremely flexible compared to how it was years ago, as families of equity release consumers used to have to pay off their debts as a result of the house decreasing in value since the homeowner took out equity. Now, the equity release lender takes what they need from the funds of the property sale, but nothing more.
Finally, you are guaranteed a complaints process if your equity release lender is an ERC member. If you are unhappy with your equity release lender, you can contact the ERC and inform them of this.
Some of our clients find this very reassuring as they know that there is somewhere to go if they feel that their money is not being handled well, or that their experience of the equity release scheme is completely different to what they were promised.
Should I Get an Adviser and a Solicitor Through the Equity Release Council?
Yes, you should ensure any advisers and solicitors you meet with are also members of the ERC. This is the best way to make your equity release experience a positive one, and to prevent any scams from occurring.
It is possible for you to find reputable advisers and solicitors who are not ERC members, so feel free to do this if you prefer. Sometimes it is more affordable to do this, and sometimes you will find a professional who meets your needs without being an ERC member.
However, selecting an ERC-approved adviser or solicitor is a way of guaranteeing that you will be protected when you take out equity, in terms of being able to move home, having a no negative equity guarantee, being able to file complaints, and having an interest rate that is either fixed or variable but with a cap.
Some people choose not to use a solicitor at all, except for one face-to-face meeting that is required. However, we would advise against doing this, as you may end up struggling to deal with the legal side of equity release without an equity release trained solicitor.
For example, if the equity release lender makes an offer you are not happy with, it would be difficult for you to navigate this on your own, whereas a solicitor would be well-versed in this and would make the process as smooth as possible.
The same goes for speaking to advisers – we recommend doing this as often as you can to ensure you understand how equity release would affect you and which plans would be best suited to you.
I Want to Take Out Equity – Where Do I Start?
You will need to contact us on 0330 058 1579 and request a free consultation. You can do this any time between 8am-8pm any day of the week. We have a team of equity release advisers who are able to explain how equity release works and the importance of finding lenders, advisers, and solicitors who are ERC members.
You can also make the most of the resources on our website to find out how equity release could affect you on a personal level. Try out our equity release calculator to find out how much money you could release, request a personalised quote from us, read our FAQs, and have a look at all the equity release plans that are provided by the ERC.
In terms of the equity release application process, it takes around one week to process an application, but a total of 6-8 weeks to receive a loan.
After applying for equity release, you will have a property valuation to determine the eligibility of your property, you will meet with a solicitor to discuss the legalities of equity release, you will receive an offer from the lender, and you will choose whether to accept or decline this offer.
If you have been rejected by an equity release lender, get in touch with us and we will advise you on how you might be able to proceed with the scheme by selecting a different lender or plan. It may be that you simply weren’t the right fit for the lender, or you enrolled on a plan you were not eligible for.
On the other hand, if you are not eligible for equity release at all, you will have to consider alternatives to equity release. You may want to budget more strictly, remortgage your home, borrow from loved ones, use credit cards, increase your hours at work, or downsize.
If we believe you can change your situation to improve your eligibility, we will explain how you can do this. For example, you may need to simply wait until you reach the minimum age requirement of 55, or you may need to get your property into a better condition.
References
[1] About the Equity Release Council https://www.equityreleasecouncil.com/about/#who-we-are
[2] Can I repay my Equity Release? https://www.gov.uk/guidance/how-downsizing-selling-or-gifting-a-home-affects-the-additional-inheritance-tax-threshold
