Equity Release debate: Drawdown vs. Lump Sum
Too many consumers are opting for a lump sum when using equity release instead of drawing it down over time, claims industry expert.
Dean Mirfin, Group Director of Key Retirement Solutions, believes equity release advisers are not doing enough to inform clients about the benefits of drawdown.
Speaking at the Equity Release Market Monitor survey last week, Mirfin questioned adviser’s approach given the advantages of drawdown, despite it already accounting for 55 per cent of the market:
“Customers using drawdown benefit from lower borrowing costs because they are able to draw funds when required. There is still work to be done to ensure they are not taking out single advance equity release when they do not have a requirement for funds all at once.”¹
However Mirfin’s opinion is not shared by fellow industry authority, Vanessa Owen. The Head of Equity Release at LV= claims to have experienced little evidence supporting Mirfin’s push for drawdown, especially in the current climate:
“Often when people get the money in one lump sum it is for something such as a house purchase or to pay off existing debts, so it is logical that they are withdrawing the money in this way.”¹
Richard Espley, Head of Equity Release at Goldsmith Williams, see both sides of the argument but emphasises the needs of the client must be at the heart of all advice around equity release:
“We are all aware of the current financial climate’s impact on the equity release market and the varying need for this product; helping children or grandchildren with a deposit for their first house a prime example of where a lump sum is far more suitable than drawdown.
“It is responsibility of the equity release adviser to establish the basis of why the client wishes to release equity from their property and then recommend which direction is most appropriate and in their clients’ best interest.”
Content correct at time of publication