Financial product manufacturers are creating more sophisticated products to allow consumers to access the equity in their home, in response to those running out of options in the face of mortgage stress.
One of those companies offering services is ARAP, which has launched an offer it describes as Agreed Risk Adjusted Purchases (ARAP).
The way the company works is to pay out the client's mortgage, settle all other debt, become the owner of the property, and then let the client live in it for a defined period of up to three years. This can allow them to avoid initial bankruptcy.
The company joins a marketplace of "home equity release firms" that are offering more and more complex equity access products allowing consumers to stay, temporarily at least, in their home.
AMP financial planner Andrew Heaven told InvestorDaily there is a demand for this type of product.
"On the one side, manufacturers are trying to differentiate themselves in the market, and on the other side, there are genuine people out there who could do with access to this type of niche lending," he said.
However, Mr Heaven questioned the mass marketing of these solutions.
"If there is a simpler, lower-cost alternative, that obviously should be the first port of call," he said.
ARAP says on its website it is focused on "borrowers in mortgage distress, mortgage default and those who have exhausted all available finance options".
However, distressed lending might not always be appropriate. Mr Heaven, referring to clients with large personal debts, said offering incorrect products "is almost like re-arranging deck chairs on the Titanic if you (and the product) are not addressing what has caused the circumstances".
Saying that, Mr Heavens was quite willing to admit there is a niche demand for these tailored products, but said as with all these things, "the devil is in the detail".
