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Mis-sold equity release: how to identify it and claim compensation

5 mins read
by Unbiased Team
Last updated January 29, 2025

Investigate how mis-selling in equity release occurs, the signs to watch for, and the support available to help you seek compensation.

Have you been mis-sold equity release?

Learn how to identify mis-selling, what your legal rights are, and how to claim compensation.

Key takeaways
  • Mis-selling occurs when providers fail to disclose the costs, risks, or implications of equity release schemes.

  • Signs of mis-sold equity release include misrepresentation of fees, pressure sales tactics, and unsuitable recommendations.

  • The Financial Ombudsman Service helps resolve disputes about mis-sold equity release schemes free of charge.

  • Specialist mis-sold equity release lawyers can increase your chances of securing compensation.

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What is equity release?

Equity release is designed for homeowners aged 55 and over to help unlock the value tied up in their property without selling it.

The funds can be taken as a lump sum, in smaller instalments, or a combination. Two primary types of equity release exist: lifetime mortgages and home reversion plans.

A lifetime mortgage allows you to borrow money secured against your home while retaining ownership. The loan and accumulated interest are repaid when the property is sold, typically when you pass away or move into long-term care. 

Home reversion plans, on the other hand, involve selling a portion or all of your home to a provider in exchange for a lump sum or regular payments. You retain the right to live in the property rent-free until the end of your life, but ownership transfers to the provider. 

Each option has implications for inheritance, property ownership, and financial planning, making it vital to fully understand the terms and long-term impacts before committing.

Can equity release be mis-sold?

Mis-selling occurs when a financial product is recommended or sold inappropriately without regard for the consumer's unique needs or circumstances.

Mis-sold equity release happens when providers fail to meet these standards or neglect to provide clear, accurate, and complete information about the product.

For instance, a provider may fail to disclose the full costs of the scheme, including fees and the impact of compounding interest over time. Another common example involves an inadequate explanation of how equity release affects inheritance or property ownership. 

Understanding what happens to your equity release plan after your death is crucial for ensuring your beneficiaries are well-prepared.

Learn more: what happens to my equity release plan on death?

Providers are also responsible for recommending suitable products. If they suggest a plan that does not align with your financial circumstances or goals, it constitutes mis-selling.

Additionally, some cases arise when a provider breaches the terms of the equity release agreement, leaving the homeowner at a disadvantage.

What are the signs you may have been mis-sold equity release?

Here are key indicators that you have been mis-sold equity release:

  • Misrepresentation of fees or charges: If the actual costs of the equity release were unclear or hidden, this suggests mis-selling.

  • Pressure sales tactics: Being rushed into a decision without adequate time to consider your options is unethical and a common red flag.

  • Lack of proper financial suitability assessment: Equity release should only be recommended after a thorough review of your financial situation, including the alternatives.

  • Failure to disclose inheritance implications: If you were not fully informed about how the equity release scheme would affect your beneficiaries, this is a sign of mis-selling.

  • Inadequate discussion of risks to your ownership: A reputable provider should explain the impact of equity release on your ability to retain ownership of your home.
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What are your rights if you've been mis-sold equity release?

Consumers in the UK are protected by stringent regulations overseen by the Financial Conduct Authority (FCA). If you believe you’ve been the victim of mis-sold equity release, you have the right to file a complaint and seek compensation.

The FCA requires providers to adhere to clear standards, ensuring transparency and fairness in all dealings. If these standards are breached, you have grounds to challenge the provider.

However, complaints must generally be made within six years of the agreement or three years of becoming aware of the issue.

The Financial Ombudsman Service is an independent body that helps resolve disputes between consumers and financial firms. This free service investigates complaints, evaluates evidence from both parties and determines whether compensation should be awarded.

While the process can take several months, it ensures a fair resolution without additional costs to the consumer.

Here are five of the best places that offer free financial advice and guidance:

1. MoneyHelper

2. Citizens Advice

3. StepChange

4. National Debtline

5. The Financial Ombudsman Service

Learn more: where can I get free financial advice and guidance

How to claim compensation for mis-sold equity release

To claim for mis-sold equity release, follow these steps:

Step 1: Review your equity release documents and assess potential mis-selling

Start by carefully reviewing your agreement and supporting documentation. Look for any signs of mis-selling, such as unclear terms or undisclosed fees. This step is crucial in identifying the basis of your claim.

Step 2: Contact your equity release provider to lodge a complaint

Notify your provider of your concerns in writing. Be specific about the issues and include evidence where possible. Providers typically have up to eight weeks to respond.

Step 3: Escalate the issue to the Financial Ombudsman if necessary

If the provider fails to resolve the complaint, escalate the matter to the Financial Ombudsman. This independent service will investigate the case and decide on appropriate compensation. While this process may take several months, it ensures impartiality and a binding resolution.

Step 4: Consider engaging a specialist mis-sold equity release lawyer

If the complaint remains unresolved, hiring mis-sold equity release lawyers can be beneficial. They have the expertise to navigate complex claims, increasing your likelihood of success.

Should you hire a mis-sold equity release lawyer?

Hiring a lawyer offers significant advantages in handling claims for mis-sold equity release schemes. 

Legal professionals are well-versed in financial regulations and can identify breaches more effectively than most. Their expertise ensures every aspect of your claim is thoroughly reviewed, increasing your chances of securing compensation.

However, there are considerations to bear in mind. Legal proceedings can be time-consuming, potentially lasting months or even years, and costs can escalate quickly. If your claim is unsuccessful, you may not recover legal fees. Before engaging a lawyer, weigh these factors carefully. 

For those seeking financial advice or an alternative to legal representation, Unbiased can connect you with FCA-regulated professionals to help you navigate your options.

How to prevent future mis-selling of equity release

Preventing mis-sold equity release starts with informed decision-making.

  • Choose FCA-regulated professionals: Always work with advisers and providers authorised by the FCA and consider financial advice beforehand to ensure equity release is right for you.

  • Understand all fees and conditions: Ask for a breakdown of costs and long-term impacts before signing any agreement.

  • Check for Equity Release Council (ERC) membership: The ERC promotes best practices and ensures member firms adhere to strict standards. 

Get expert financial advice

Seeking redress for mis-sold equity release schemes can feel overwhelming, but understanding your rights and taking the appropriate steps may lead to a fair resolution.

Whether you pursue compensation on your own or use a specialist lawyer, the key is to act promptly and ensure your claim is backed by clear evidence.

Let Unbiased match you with a professional financial adviser or qualified mortgage broker who can guide you through your options, avoid mis-sold equity release schemes, and help you make confident, informed financial decisions tailored to your needs.

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Author
Unbiased Team
Our team of writers, who have decades of experience writing about personal finance, including investing, retirement and pensions, are here to help you find out what you must know about life’s biggest financial decisions.