A scheme which allows homeowners to unlock cash from their home could become the next mis-selling disaster, a consumer group has warned.
The schemes are tempting for cash-strapped pensioners
The National Consumer Council (NCC) is urging the government to regulate the schemes, known as "home reversion".
Under the plans, homeowners sell all, or part, of their home to a reversion company and are given a lifetime lease.
But critics say the schemes are poor value, and can lock people into a decision they may later regret.
From October 2004, the FSA will regulate mortgages.
What is a home reversion plan?
You sell your home, or a part of it, to a reversion company that allows you and your partner to continue to live there for the rest of your lives. After you both die, the proportion of your home that you sold becomes the property of the reversion company.
While mortgage based products, including some equity release plans, will fall within its remit, the rules will not cover home reversion schemes.
The schemes are often poor value, with people getting only 20% to 60% of their home's market value.
In June, the Treasury announced plans to consult on the regulation of equity release schemes.
This consultation closed on Friday, and some fear the government will decide against regulating home reversion plans.
What is a lifetime mortgage?
You borrow money secured against the value of your home to give you a lump sum or a regular income. The loan is repaid to the lender when your property is sold. You continue to own your home. Interest only and roll-up loans are included in this category. The schemes will be known as lifetime mortgages in October 2004.
Sales of equity release plans are expected to soar over the next few years, as more people fall back on the value of their home to top up dwindling pensions.
Ed Mayo, NCC chief executive, said: "A two-tier regulatory system would be an open invitation for unscrupulous advisers to promote home reversions to consumers without any suitability tests."
The NCC comments echo similar fears made by the Council of Mortgage Lenders.
The CML believes home reversion plans must be regulated to protect consumers.
Failure to regulate them could result in a "skewed equity release market that disadvantages consumers, most of whom are elderly and some of whom may be vulnerable," it said.