Property fraud has been escalating in the UK, primarily due to the increasing popularity of equity release loans. These loans enable homeowners aged 55 and over to access tax-free cash from their property. While these loans can help supplement retirement income or finance home improvements, the rapid growth of the equity release market has also created opportunities for fraudsters to target vulnerable homeowners.
The Equity Release Market Doubles
In the past five years, the equity release sector has doubled in size, with homeowners accessing £6.2 billion. However, this swift expansion has led to a rise in fraudulent schemes. Schemes that put unsuspecting victims at risk of losing significant sums of money.
As house prices continue to rise, more homeowners are opting for equity release to support their financial needs. Unfortunately, this increased demand has also attracted fraudsters, who exploit vulnerable individuals by manipulating them into taking out loans that benefit the fraudsters instead of the homeowners.
Fraudsters Exploit Homeowners
Lawyers and industry experts have reported a troubling increase in cases. Cases where vulnerable homeowners are deceived into releasing their property wealth by cunning fraudsters. These fraudsters persuade victims to take out equity release loans. Convincing them to withdraw substantial sums from their property.
One such case from April 2019 involved an elderly victim who applied for a £40,920 lifetime mortgage with Age Partnership. Despite evidence that the victim had been targeted by an investment scam, the company approved the loan. The Financial Ombudsman Service (FOS) later ruled that Age Partnership had failed to notify other lenders about their concerns, contributing to the scam’s success.
This and other similar cases have raised concerns about consumer protection within the equity release industry. While regulation has improved since the 1990s and 2000s, experts stress the importance of seeking legal advice before signing up for an equity release loan to help identify and prevent fraud.
Calls for Increased Regulation
To strengthen consumer protection, calls have been made for increased regulation of providers by the Financial Conduct Authority (FCA). The FCA has found evidence of poor advice in the lifetime mortgage market and is currently investigating a sample of firms, intervening where necessary.
Equity release mis-selling is becoming a significant issue, but few victims file complaints with the FOS. Many people are embarrassed or ashamed to come forward, making it challenging to address the problem. Moreover, a considerable “information inequality” between consumers and lenders makes it difficult for consumers to win their cases. Since 2020, the FOS has received over 1,200 complaints about equity release, but only 6% to 10% of cases are upheld in the consumer’s favour.
Age Partnership Makes Commitment
In response to the criticism, Age Partnership has stated their commitment to providing high-quality advice and maintaining extensive procedures to minimise risks. They continually review these procedures and policies internally and with independent third-party consultants to ensure their effectiveness.
As the equity release market continues to grow, it is vital for homeowners, especially the elderly, to be aware of the potential for fraud and take precautions to protect themselves. The industry must also work to strengthen safeguards and actively ensure that fraudsters do not exploit vulnerable individuals.
Protecting Yourself
To protect yourself and your loved ones from property fraud, please consider the following tips:
- Research potential lenders: Investigate a lender’s reputation and track record before engaging with them. Look for honest reviews and testimonials from previous customers to gauge their reliability and trustworthiness.
- Seek professional advice: Consult a registered financial advisor or solicitor before signing any equity release agreements. They can help you understand the terms and conditions and ensure the loan is in your best interest.
- Be cautious of unsolicited offers: Be wary of unsolicited offers for equity release loans, as fraudsters often use this tactic to target vulnerable individuals. Verify the legitimacy of the lender before proceeding.
- Monitor your credit report: Regularly review your credit report to check for any suspicious activity or unauthorised loans. This can help you identify potential fraud early and take action to minimise the impact on your finances.
- Discuss with family members: Talk to your family about your intentions to take out an equity release loan and share any concerns. They can offer support and a second opinion on whether the loan is necessary and if the provider is trustworthy.
- Report suspicious activity: If you suspect that you or a loved one may be a victim of property fraud, report it to the appropriate authorities, such as the FCA or the local police. Taking prompt action can help prevent further financial loss and bring the fraudsters to justice.
By following these tips, you can protect yourself and your loved ones from becoming victims of property fraud. As the equity release market continues to expand, it is crucial for consumers to remain vigilant and for regulators and industry leaders to prioritise consumer protection.
