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Last Updated: Monday, 10 May, 2004, 13:12 GMT 14:12 UK
Home reversion set for regulation
A house
Critics argue home reversion offers poor value
A scheme which allows homeowners to unlock cash from their home is to be regulated, the Treasury has announced.

Under "home reversion" plans a homeowner agrees to sell all or part of their home in return for a lump sum.

When the borrower dies or moves home the lender gets the share of the property they agreed to buy, but critics say the schemes are poor value.

The Financial Services Authority (FSA) will take on regulation of the plans, a move welcomed by consumer groups.

'High risk nature'

From October 2004, the FSA will regulate mortgages.

The Treasury has realised the high risk nature of home reversion schemes, and that they should be regulated along with other types of products
Laurence Baxter, Consumers' Association

While mortgage-based products, including some equity-release plans, will fall within its remit, the rules did not cover home reversion plans.

Consumer groups have claimed that home reversion plans offer poor value, with people getting only 20% to 60% of the market value of their equity.

The products are predominantly marketed at elderly homeowners as a way of raising extra money without having to move home.

The Consumers' Association said that they were "very pleased" that home reversion plans were to be regulated by the FSA.

"The Treasury has realised the high risk nature of home reversion schemes, and that they should be regulated along with other types of products," Laurence Baxter, Consumers' Association senior policy advisor, said.

The rules governing the regulation of the plans are expected to be released over the summer.


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