New guidelines have been published ahead of the introduction of equity release mortgages in Guernsey next year.
From 1 January 2026, lenders will be able to offer the mortgage type locally, to allow pensioners to trade their property for cash as they near their later years, if they want to.
This scheme was first mooted in the island’s 2020 Budget, when the then-Policy and Resources Committee, led by Deputy Gavin St Pier, suggested that legislation should be prepared so the law could be changed so that equity release mortgages could be offered in Guernsey.
Now, the Guernsey Financial Services Commission has launched its rules and guidance, developed following a consultation which finished in February this year.
It says any finance firms looking at getting involved in Guernsey’s equity release market when it launches next year will need to follow these guidelines and rules.
When equity release mortgages were first suggested by P&R back in 2019, it said the necessary law changes would be “relatively straightforward”.
P&R also acknowledged “incidences in other jurisdictions of inappropriate selling of equity release mortgages” and said it wouldn’t enact the legislation until it is satisfied that there are appropriate consumer safeguards in place.
That will be a decision for the States, while the GFSC will monitor lenders’ behaviour and standards.
Working with the UK’s Equity Release Council, the GFSC said its new regulatory framework will include five product standards that will protect customers including the right to stay in your home for life, the option to move home, a ‘no negative equity guarantee, and the ability to make repayments without a penalty fee.
Interest rates must also be fixed or if variable, capped for the life of the loan.
A sixth safeguard has already been introduced in the UK, since the GFSC carried out its consultation earlier this year
That means there is no early repayment charge if the homeowner moves into care provided a medical certificate is provided.
Customers in the UK already benefit from all of these safeguards said the GFSC.
“The equity release framework, which will come into effect from January 2026, is a crucial first step towards these products becoming available locally,” said Dr Jeremy Quick, Director of Banking and Insurance Division at the GFSC.
“We are confident that we have created a framework that is attractive to new market entrants. Clearly, much will depend on consumer demand and equity release providers’ appetite to enter the market here. The consumer protections we’ve introduced within the regulatory framework will mean that when the time comes, homeowners can enter into these arrangements with confidence.”
Kelly Melville-Kelly, Director of Risk, Policy and Compliance at the Equity Release Council said what will be offered here is in line with what’s available in the UK so it is ‘tried and tested’.
“We are delighted to have been able to support the Commission as it develops the rules and guidance that regulate equity release in the Bailiwick of Guernsey.
“The Council’s product standards provide people across the UK with the confidence to explore their choices when it comes to accessing housing equity and the fact they have served to inform the Commission’s approach highlights their value in supporting market growth.”