EQUITY RELEASE REGULATION ESSENTIAL TO PROTECT VULNERABLE PENSIONERS

4.50.20pm BST (GMT +0100) Fri 6th Jun 2003

Responding to reports that the Treasury is to consult on the fast-growing business of equity release reversion schemes, Vince Cable MP, Liberal Democrat Shadow DTI Secretary, warned the Government not to delay introducing tough regulatory measures to deal with current loopholes.

Mr. Cable said: "As the pensions crisis bites harder, it is inevitable that more pensioners will turn to these schemes to unlock the equity invested in their homes. With pensioners among the most vulnerable in society, protecting their interests must be paramount."

"It is unacceptable that the sale of some mortgage products will be regulated, but equity release reversion schemes will not. The Government's lack of foresight directly threatens hard-up pensioners and risks another mis-selling crisis.

"This has been a live issue since the Government decided to regulate certain mortgage products 3 years ago. Like always with Labour, the Government proceeds at a snail's pace, while pensioners take the risks."

ENDS Notes to Editors:

Equity release products allow homeowners to release value from their investment in their residential properties.

There are 2 key routes by which this can be achieved: 'Lifetime mortgage products' - releasing equity by way of taking out a mortgage, repayable on death; and 'Reversion products' - sale of all/part of the equity, in return for right to occupy property until death.

The sale of mortgages is currently covered by the Code of Mortgage Lending, and enforced by the Mortgage Lending Compliance Board. In addition, the decision was made to bring mortgages within the remit of the Financial Services Authority ("FSA"), the regulator for financial services matters under the terms of the Financial Services and Markets Act. The sales of reversion products are not similarly captured. The Government has placed a value on the reversion products equity release market of £250 million.