Industry Welcomes Home Equity Release Code

17 May 2005

Industry Welcomes Home Equity Release Code

The Government’s signalled intention to develop a code of practice for home equity release schemes has been warmly welcomed by the industry’s leading provider of HER product, Sentinel.

Sentinel Managing Director Richard Coon said today that the announcement funds would be made available in this week’s budget to enable the Office for Senior Citizens to develop the code is extremely pleasing and is good news both for the industry and for older people.

“Sentinel has been working with the Minister for Senior Citizens, Ruth Dyson for several months on this issue. We have been proactive in promoting our belief that a code of practice agreed to by the whole industry is the best way to cover matters such as disclosure of terms and conditions, risk management practices and recovery,” Mr Coon said.

Mr Coon said home equity release was increasingly being viewed as a practical solution to the problem of financial resources for a sector of the growing numbers of New Zealanders who own their own homes, but who no longer have the income to maintain them or their standard of living.

“It’s long been a kiwi tradition to invest our savings in our own homes. But as with any other kind of saving, there often comes a time when it’s more important to use that money for quality of life. Our research shows many people are using home equity release to continue to enjoy living in their own homes in safety and security.”

While Mr Coon said home equity release had an important part to play in older kiwis’ well-being, it was vital that users had confidence in product providers and their integrity.

“The kinds of safety measures we would like to see put in place include a no-negative equity guarantee, ensuring the value of the home will never exceed the net sale proceeds of the property; guaranteed occupancy for life for those designated as nominated residents; no requirement for payment until the residents cease to occupy and the home is sold.

“We would also recommend that clients receive independent financial advice and be represented by their own independent lawyer,” Mr Coon said.

“Sentinel looks forward to working with Government to develop a code which puts industry controls in place to protect the public from any hidden risks while reassuring them that home equity release is a way to make people’s later years in life more comfortable and financially viable.”

Since forming in February 2004, Sentinel has received 1300 applications for home loans with a total value of over $50 million. The average loan amount is $42,000 and the average age of the borrower is 73.

ENDS

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