HL Deb 09 March 2004 vol 658 cc1115-6

2.42 p.m.

Lord Sharman asked Her Majesty's Government:

What steps they plan to take to regulate home equity release schemes, in view of the increased use of such schemes.

The Parliamentary Under-Secretary of State, Department for Culture, Media and Sport (Lord McIntosh of Haringey)

My Lords, mortgage-based equity release schemes, also known as lifetime mortgages, will be regulated by the Financial Services Authority as from 31 October 2004. However, the Government are considering responses to their consultation on whether home reversion equity release plans should also be regulated by the FSA and will make an announcement in due course. Meanwhile, last week, on 3 March, the FSA published a consumer fact sheet entitled Raising money from your home, which I commend to noble Lords.

Lord Sharman

My Lords, I thank the Minister for his Answer. Does he not agree that there is now an urgent need to address all forms of equity release schemes? Does he recall that since the passage of the Financial Services and Markets Bill, in which we both participated, I have argued that all forms of such schemes should be included? In the summer, mortgage-based schemes for release were considered. Does he not also agree that a market now estimated by some to be worth £1 billion a year, targeted at—in the Government's own words—elderly and sometimes vulnerable people, provides a huge potential for mis-selling? If urgent action is not taken soon, will we not be attempting to shut the stable door after the horse has bolted?

Lord McIntosh of Haringey

My Lords, I pay tribute to the work of the noble Lord, Lord Sharman, during the passage of the Financial Services and Markets Bill and subsequently in pressing for the regulation of equity release schemes. I hope that he is pleased that the vast bulk of them—almost 90 per cent—which are mortgage-based schemes, will be regulated from 31 October this year.

There is a problem with home reversion schemes because, strictly speaking, such schemes are not financial services; they are sale and purchase agreements. To have them regulated would require other primary legislation. However, the consolation is that reversion schemes are almost dying out, representing only 11 per cent of equity-based release schemes compared with 94 per cent only seven years ago.

Lord Blackwell

My Lords, I declare an interest and ask whether the Minister accepts that, if operated within proper standards, equity release schemes can be an important way of allowing older people in particular to benefit from savings by translating them into income? Therefore the objective of regulation should be to create confidence so that the market can develop rather than to create conditions which would choke off its development.

Lord McIntosh of Haringey

My Lords, I do not think that I can disagree with the noble Lord, Lord Blackwell. Within the past year I myself have taken out an equity release scheme. As an elderly person—and of course I may be vulnerable as well—I can hardly disagree that, in the right circumstances, they perform a useful function.

Baroness Noakes

My Lords, during the consultation carried out by the Treasury into a regulatory scheme, can the Minister say whether there was any opposition to having a single regulatory scheme; that is, one covering both home mortgages and reversionary schemes? If so, can he tell us which organisations argued against such a single scheme?

Lord McIntosh of Haringey

My Lords, we have not published the results of the consultation which finished only last month. We shall publish them with our responses as soon as possible. The answers to the questions put to me by the noble Baroness, Lady Noakes, will of course be contained in those responses.

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