WS3 — Equity release and older owners: the paradox of law and policy

This research stream explores the needs, circumstances, and decision-making of equity release consumers with a view to evaluating the legal framework governing regulated equity release products.  The Financial Services Authority’s statutory duty is to achieve ‘appropriate’ levels of protection for consumers; but the consumers who use equity release products do so in different financial circumstances, and face different levels of consumer risk against backgrounds of varying economic security, financial capability and experience.  Some owners may opt to release equity as part of a planned strategy, while others do so under financial pressure. This raises questions about the extent to which the current regulatory frameworks, based on product risk rather than consumer risk, offer appropriate protections for consumers in a range of different circumstances.

The growing expectation that older owners will meet their financial needs in old age through housing equity transactions has created new types of risk.  This raises a paradox: while older owners are pushed towards equity release transactions by a policy context that is banking on the liquidation of housing assets after retirement, there is evidence of a lack of confidence in the legal framework that governs these transactions.  This raises a number of theoretical and empirical questions.

How are older owners viewed:

  • As risk subjects?
  • As financial subjects?
  • As legal subjects?

What makes older owners vulnerable in housing equity transactions?

How can law and regulation respond to age-related vulnerabilities without discrimination or paternalism?

Who should be held responsible for losses resulting from bad transactions?

  • The older owner/consumer?
  • The market (lenders/providers)?
  • The state (including through law)?

This work stream comprises two empirical studies – one focused on consumers and another on industry stakeholders – which will feed into a theoretical analysis of the intergenerational justice issues surrounding the regulation of housing equity products targeted at older owners.

Our key research aims are as follows:

  • To explore the needs and circumstances of older owners who have taken out different types of regulated equity release plans.
  • To investigate the decision-making of equity release consumers in the context of current regulatory measures on.
  • To evaluate the extent to which legal regulation and remedies provide appropriate protections for different types of consumer.

To achieve these aims we will:

  • Carry out 100 semi-structured, in-depth interviews with equity release consumers who have different financial circumstances.
  • Carry out 20 semi-structured, in-depth interviews with equity release stakeholders such as providers, advisers, regulators, legal personnel, advice organisations/charities.

Analyse the findings of these studies in the context of the emergent debates concerning the older owner as a legal and financial subject, and within the theoretical framework of intergenerational justice.

Publications

Overton, L and Fox O’Mahony, L (2016) Understanding Attitudes to Paying for Care Amongst Equity Release Consumers: Citizenship, solidarity and the ‘hardworking homeowner’. Journal of Social Policy. DOI:10.1017/S0047279416000416.

Overton, L and Fox O’Mahony, L (2015) Consumer Demand for Retirement Borrowing, London: Council for Mortgage Lenders.

Overton, L and Fox O’Mahony, L (2015) The Future of the UK Equity Release Market: Consumer Insights and Stakeholder Perspectives, Essex University.

Fox O’Mahony, Lorna; Overton, Louise (2015) Asset-based welfare, equity release and the meaning of the owned home. Housing Studies 30(3) 392-412, DOI: 10.1080/02673037.2014.963523.

Fox O’Mahony, L and Overton, L (2015) Releasing Housing Equity in Later Life: Markets, Consumers and the Role of the State, Law in Context: A Socio-Legal Journal (Special Issue: Ageing and the Law), 33(2) 115-141.

Fox O’Mahony, Lorna; Overton, Louise (2014) Financial Advice, Differentiated Consumers and the Regulation of Equity Release Transactions. Journal of Law and Society 41(3) 446-469, DOI: 10.1111/j.1467-6478.2014.00677.x.

Fox O’Mahon, Lorna (2012): Home Equity and Ageing Owners: Between Risk and Regulation. Oxford: Hart.

Presentations and Round tables

Overton L (2013) Equity release consumers: Needs, circumstances and decision-making. 3rd Ageing and Society: An Interdisciplinary Conference, University Center Chicago, IL, USA, 8 – 9 November.

Overton L (2013) Equity Release, Open Policy Making Seminar on Wealth and Retirement, DWP, London 22 October.

Overton L (2013) Equity release transactions and financial advice, EPPARG Seminar ‘Safely closing the Pensions gap’, Brussels, 16 October (Invited Speaker).

Fox O’Mahony L and Overton L (2013) Two nations in old age’: Consumer risk and the regulation of equity release transactions. Housing wealth in an Ageing Society:  Intra-generational inequalities and inter-generational justice.  Panel session at RC43, University of Amsterdam, The Netherlands,  10-12 July.

Fox L (2013) Conceptualising the equity release consumer:  differentiation, risk and regulation.  Paper presented at the ‘Conceptualising ‘consumers’ of financial services:  A new approach?’ Workshop, Durham Law School, 12 April

Overton L and Fox L (2013)  Equity release, property-based welfare and the meaning of the owned home’, SLSA Conference, York, 26-28 March.

Fox L (2013) Equity Release in the UK: Markets, Consumers and the Role of the State’ Law Faculty, University of Western Australia, 14 February.

Fox L (2013) Ageing, Inequalities and (Financial Vulnerabilities), Master class, Law Faculty, University of Western Australia, 12-13 February.

Overton L (2012) Roundtable discussion on equity release, hosted by CCHPR and the Nuffield Foundation.

Workshops

Lorna Fox O’Mahony had been holding a master class on “Ageing, Inequalities, and (Financial) Vulnerabilities” at the University of Western Australia.
For more information see http://www.ias.uwa.edu.au/masterclass/fox
Date: 14 February 2013

Durham Law School hosted the workshop ‘Conceptualising ‘consumers’ of financial services: A new approach?’
https://www.dur.ac.uk/law/events/lawevents/?eventno=14451&aggregated=1
Louise Overton and Lorna Fox O’Mahony will present a paper at this workshop titled: ‘Conceptualising the equity release consumer: differentiation, risk and regulation’
Date: 12 April 2013

WS Members

Prof Lorna Fox O’Mahony (Co-Investigator, CI) lfox@essex.ac.uk
Dr Louise Overton (Research Fellow Essex, Visiting Fellow Birmingham) loverton@essex.ac.uk

 

WS Institution

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