The equity release market has grown significantly in Scotland, with an increasing number of over 55s, who are finding it difficult to borrow through traditional sources, turning to equity release schemes to unlock some of the money in their properties to pay off mortgages and boost retirement incomes.
Responsible Equity Release alone has seen enquiry levels from homeowners living in Scotland more than double (114%) in the past six months. Scottish homeowners currently release around £67m a year in equity every year with the average release size £34,500, compared to the national average of £62,700.
But if the ‘Yes’ vote wins the day today, the equity release market in Scotland could be at risk, both from falling property prices and a lack of available lenders.
House prices north of the border are predicted to fall by 10-15% if Scotland becomes independent. This could wipe out the equity many people have in their properties.
There are currently no equity release providers operating out of Scotland, but if an independent regulatory body for financial services is set up in Scotland, equity release providers would need to comply with their regulations. This would prove complex if the providers were based outside of the country.
There would also be a question mark around what currency equity release plans would be issued in. Traditional mortgage lenders have already raised concerns that if they lend in sterling, and Scotland switches to a new currency, that the new currency won’t hold its value against the pound.
Surprisingly, there has been very little comment from the equity release providers themselves and no official announcement as to their plans in the event of a ‘Yes’ vote.
Steve Wilkie, managing director, Responsible Equity Release, said: “There are so many uncertainties and complexities around Scottish independence.
“It’s likely that if the ‘Yes’ vote wins, equity release lending would pause in Scotland until there is a clearer picture of the financial services framework moving forward.
“Independence would potentially mean two regulatory environments and anyone providing equity release plans north of the border would need to be regulated by the Scottish regulatory body and comply with their legislation.
“The Scottish Financial Enterprise has already stated that ‘it is unlikely that the Parliament in a newly independent Scotland would want to demit a function of government as important as financial regulation to the legislature of another country’.
“The equity release market is providing a valuable service to many Scottish people – helping them pay off their mortgages and provide extra funds so they can enjoy the retirement they’d hoped for.
“If the ‘Yes’ vote succeeds on Thursday this could leave thousands of people over the age of 55 facing an uncertain future.”