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Report calls on local authorities to give equity-release loans

Local authorities should start providing equity-release mortgages to give the market much-needed impetus, says the influential Joseph Rowntree Foundation.

A study by the foundation says a drastic solution is required to resolve the problem of consumers having little faith in the market without more high-street brands being involved, while many brands will not enter until the market is bigger.

It also calls for restrictions on means-tested benefits to be relaxed so potential borrowers are not put off.

It is the latest call for the public sector to breathe life into a static market that many see as the answer to the pension crisis.

Consumer lobbyist Which? said in January that it wants the Government to lead the equity-release market into the mainstream.

The Rowntree report says one of the reasons there is a shortage of IFAs in the market is because they are put off by high fixed costs.

The report says: “Local authorities offering equity-release deals through a funding company sponsored by local government might provide reassurance to older homeowners, given the Government endorsement.

“There is widespread mistrust of equity release and belief that it is not good value for money.

“Regulation of the sales process by the FSA does not appear to have been followed by increased demand.”

Key Retirement Solutions business development director Dean Mirfin says: “You cannot dispute the principle of local government getting involved but will people trust local authorities?”

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