This comes as new figures show the equity release market is growing.
The new leaflet explains clearly and explicitly how the Code applies to equity release mortgages. It commits lenders and intermediaries to explaining, among other things:
i) Whether borrowers need to make any payments while the equity release mortgage is in place;
ii) Whether the lender offers a "no negative equity" guarantee;
iii) What happens if the borrower needs long-term care, or if someone else moves into the property;
iv) Whether the property can be repossessed under any circumstances;
v) That taking out an equity release mortgage may affect benefits, tax, and inheritance; and
vi) How the loan works - including how the amount owed will increase if no payments are made, and how any change in the value of the property might affect the amount left to pass on as inheritance.
The move comes as the CML published new figures showing that the amount of equity release lending outstanding in the market was more than £1.5 billion at the end of 2002. The CML estimates that around £650 million of equity release loans were advanced during 2002, accounting for some 16,000 of the estimated 38,000 outstanding equity release loans.
These figures are small - accounting for only around 0.2% of the total UK mortgage market - but the potential for equity release lending is high. With an "asset-rich, cash-poor" ageing population, the potential size of the equity release market could be between £50-100 billion. Against this backdrop, the CML is keen to promote safeguards for responsible lending growth in this sensitive market.
Jackie Bennett, Senior Policy Adviser at the CML, explained the rationale for the new leaflet: "The Mortgage Code applies to all mortgages including equity release mortgages, but consumers need to understand clearly the protection it provides. The new leaflet will explain this. All lenders and intermediaries who subscribe to the Mortgage Code will give it to anyone considering an equity release mortgage."