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The equity release industry has shot down a suggestion that the government should launch a UK Equity Bank to offer loans against people's houses.

A new report, The UK Equity Bank: Towards income security, by Cass Business School and the International Longevity Centre, said the government could exchange an income in retirement for a share in a homeowner's property.

The debt could be repaid from the sale of the property at death.

Dean Mirfin, group director at equity release specialists Key Retirement Solutions, said the report was "a good debating point", but the suggestion wouldn't work in practice.

"Many taxpayers will find it very hard to understand why the government should start offering loans against people's houses when there is already a well-established, well regulated, and successful private industry enabling homeowners to release equity from their homes.

"On the same principle will we next suggest the government should be offering credit cards and loans"

Mirfin warned it would only take a small shift in the housing market for the government to be left with substantial debts, plus there was the risk of people living longer than expected.

"On top of all of that there is the issue of advice. People need advice before taking out equity release but how is this going to be funded and who is going to be an adviser for the Equity Bank

"It is a constructive idea and good to have a debate but it is hard to see this ever becoming reality.

"The debate would be better focused on how retirees obtain greater access to the options for releasing equity which are already available."

Nigel Waterson, chairman of the Equity Release Council, said: "The equity release sector is growing from strength to strength, with lending at pre-recession levels as more people look to their property wealth to solve their savings shortfall.

"The market continues to evolve with new product flexibilities - such as the ability to pay interest as you go - and most importantly, stringent safeguards like the no negative equity guarantee'.

"It's unlikely that a simpler' alternative can offer the same consumer protections and rival the structured financial advice, face-to-face legal guidance and product safeguards that come as standard, overseen both by industry and financial regulators.

"Instead of taking on a provider's responsibilities and the associated risks, we urge government to throw its support behind the industry and work to raise awareness and promote better understanding of and access to equity release."

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