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Blog from an Equity Release Expert
9th October 2009
It's somewhat depressing as now Northern Rock have withdrawn from the Lifetime market.
The Newcastle Building Society closed their doors to new business as have the Saffron Building society.
Fewer lenders to choose from reduces the choice available.
One good piece of news is that The Quote Engine showing what's on offer has been improved.
I can produce illustrations in a timely manner to help explain exactly what is on offer.
These can be emailed to you prior to a face to face meeting to help you assimulate the information.
29 August 2009
Sad news about the Coventry Building Society
Coventry Building Society informed advisers it would be pulling its Godiva range of lifetime mortgages this week and would not be replacing them for the foreseeable future.
8th August 2009
Would I recommend sale and rent back to a client?
No! I wouldn’t. Not until I had exhausted every other possibility, including negotiating with my client’s lender and exploring the various government rescue schemes.
But what if every option had been considered and either found to be not possible or not appropriate?
What if repossession was looking like a very real possibility, then what would I do?
As a broker, I would want to do everything possible to help my client avoid repossession, which can destroy families, marriages and even the children’s education prospects.
Sale and rent back is, therefore, an option which you should consider. Yes, it is a facility of last resort. But when no other options exist, sale and rent back does enable homeowners to keep a roof over their heads and their family unit in one piece. Which has to be an objective worth pursuing, surely?
The answer is not to turn your back on sale and rent back, but to seek out schemes which are ethical, fair and safe, such as the Home Rescue & Buyback scheme developed by Residential Property Solutions.
It like no other scheme available today.
27th July 2009
In Retirement Services - closed to all new business
The affairs, business and property of In retirement Holdings Limited, In Retirement Services (Reversions) Limited and Equity Release Limited are currently being managed by R Allen, C Siddle and N Edwards as Joint Administrators. The Joint Administrators act as agents of each Company only and without personal liability. Unless otherwise shown all Joint Administrators are authorised by the Institute of Chartered Accountants in England and Wales (ICIEW).3rd June 2009.
Sad to see another provider out of the business, the market is getting much more difficult because of the uncertainty of any future growth in the property market.
At last! Sale and rent back to be regulated!
The Government today laid before Parliament secondary legislation to bring sale and rent back agreements within the scope of Financial Services Authority (FSA) regulation. The Government also published a summary of responses to its consultation on the sale and rent back market, which closed on 1 May 2009. The FSA will publish shortly details of its regulatory regime, which will take effect on 1 July 2009 subject to Parliamentary approval.
The Government's consultation followed an Office of Fair Trading (OFT) market study published at the end of last year, which looked at the impacts of the growing sale and rent back market. The OFT report identified a number of risks to homeowners entering into these arrangements and made three recommendations to Government, including compulsory regulation, increasing consumer awareness and improving information about housing benefits.
The legislation laid today includes a two-stage approach to regulation, in order to ensure consumers are protected as quickly as possible in the current market environment. The FSA will put in place its full regulatory regime in the second quarter of 2010, following consultation and the publication of its final rules.
The Chief Secretary to the Treasury, Yvette Cooper, said:
"The Office of Fair Trading found last year that vulnerable homeowners were at risk from unscrupulous sale and rent back operators. It's not right that people can be pushed out of their homes through dodgy deals."
1. The sale and rent back (also known as sale and lease back) market offers homeowners the option of selling their properties at discounted rates in exchange for tenancy arrangements. Sale and rent back agreements effectively combine two transactions - firstly, individual homeowners sell their property at a discount, and secondly they are offered an agreement to remain in the home as a tenant.
2. At Budget 2008, the Government asked the Office of Fair Trading (OFT) and the Financial Services Authority (FSA) to investigate the sale and rent back market, focusing on consumers' experience of these arrangements, and consider options where appropriate to strengthen consumer protections. On 14 May the OFT announced that it would conduct a formal market study, working to an expedited timetable in light of stakeholder concerns.
3. The OFT published its report on the sale and rent back market study on 15 October 2008.
4. The Government published its reponse to the OFT market study on 22 October 2008.
5. The Government published its consultation on regulating the sale and rent back market on 6 February 2009.
6. The FSA published its consultation on the details of an interim regulatory regime for the sale and rent back market on 6 February 2009.
7. The Government's consulation closed on 1 May. The Government published its response to this consultation on 1 June 2009.
8. The Government is taking action to support homeowners in difficulty:
* Statutory regulation of mortgages and credit provides homeowners with important protections and appropriate means of redress. In 2004 the Government extended the scope of FSA regulation to cover first charge residential mortgages. The FSA's regime requires that lenders only move to repossession as a last resort. Regulation of other credit business is covered by consumer credit legislation, administered by the Office of Fair Trading (OFT).
* The Government launched Homeowners Mortgage Support on 21 April. This new scheme, together with changes announced at Budget 2009 to Support for Mortgage Interest (SMI) and the Government's Mortgage Rescue Scheme, will help homeowners who experience a temporary income shock, lose employment, or are otherwise vulnerable, to remain in their homes. The Government has also taken action to help ensure that every household struggling with debts has access to free and impartial debt advice.
30th April 2009
Lower loan to values announced by New Life Mortgages & Stonehaven
Under the new products are the current Loan to values for Stonehaven and New Life have also lowered the amount they will currently lend.
I suspect this is to reduce the future negative equity trap that the lenders will possibly fall into.
Retirement Plus -In my opinion, the most helpful and flexible Reversion plan lender have been just too successful.
It shows there's a credit crunch when the most progressive lender in the market runs out of funds for new loans. It is sad to see that they have had to temporarily stop taking new business because they don't have the funds. However, I am assured that they will be open for business as soon as funds become available. I'll keep you informed.
April 6th 2009
UK State Pension Increased on 6th April but will it be enough?
“While these increases to the basic state pension are certainly welcome, UK pensioners are still struggling! Even with the recent changes, the state pension is just £413 per month for single retirees and £659 per month for retired couples. The average 70 year old equity release customer could typically raise £61,500 from their £205,000 property** – a sum that could substantially improve many retirees standard of living.
“As the UK population ages and pension provision appears to stall, the UK is facing a very real retirement funding crisis. Therefore, we urge the government and other stakeholders to seriously consider the role that equity release can play in helping to solve the British pension shortfall and improving the lot of the average UK retiree.”
ABOUT TIME TOO!
The regulator set out its proposals in its consultation paper published today , which are designed to reduce consumer detriment in this growing area of the housing market.
Under the proposals, a two staged regulatory approach could be taken with an interim regulatory regime to be brought in from July 2009 to address the most significant problems consumers face as soon as possible. This will be followed by a full regime which is likely to be implemented in the second quarter of 2010.
Under the interim regime, sale and rent back firms will need to meet FSA threshold conditions including the requirement to be run by fit and proper people, to adhere to the principles for businesses and to meet some systems and controls and conduct of business rules.
Sale and rent back schemes involve individuals selling their home, usually at a discount, and obtaining an agreement to remain in the property for a set period - typically through an assured shorthold tenancy of six to 12 months.
However the sector was made the subject of an Office of Fair Trading (OFT) market study last year after cases emerged that some firms were imposing substantial rent increases and were evicting tenants after a short tenancy period.
The study found that some consumers enter into sale and rent back transactions when it might not be the best option for them and that some sale and rent back firms may mislead customers as to the value of their property or the security they have as tenants.
This includes telling people they will be able to stay in their home for years, when in reality the tenancy may only be guaranteed for six to 12 months.
It is also possible that tenants may lose their homes if the landlord defaults on the mortgage and some consumers may be evicted because they cannot afford the agreed rent, which suggests staying in their property may not have been sustainable in the first place.
The government accepted the OFT's main recommendation that sale and rent back should be regulated by the FSA and HM Treasury is also today publishing a consultation paper proposing to bring sale and rent back within FSA scope and setting out a definition of a regulated sale and rent back agreement.
Dan Waters, FSA director of retail policy, said the issues identified by the OFT warrant a fast response, which is why it is seeking to bring in an interim regime this summer designed to ensure fairer treatment of customers as soon as possible.
"This two-stage approach is a new departure for us, but we believe it provides the right balance between implementing regulation quickly in order to address more serious cases of detriment, while giving us time to develop and implement a full regulatory regime that is suitable for the sale and rent back market."
The consultation paper is open for responses until 1 May 2009.
2nd February 2009
SHIP plots future course
Safe Home Income Plans (SHIP), the equity release trade body, has revealed that it plans to publish a White Paper in the coming months, setting out exactly what the body hopes to achieve.
Director general Andrea Rozario said the paper would serve as a manifesto for SHIP, laying out its policies and looking at specific outcomes it is targeting to help develop the reputation and performance of the sector.
She added: "We are engaging with the stakeholders now, and getting their views on where they think we need to go, and how best to progress with the paper."
Jon King, managing director of Hodge Lifetime, argued that the Government needed to make its position on equity release clear, and suggested that SHIP's move may spark further engagement by the Government with the sector.
He continued: "This is a sensible way forward – it will spark some debate, but it is just a starting point. All of those within the industry that I have discussed this with have been very positive about the idea. We will definitely give Andrea our full support."
18th November 2008
In fact, you only have to look at the language used by some of the adverts for sale and rent back schemes to give themselves credibility to see how far the stock of the industry has increased.
The recent quarterly figures also show that the industry is continuing to do comparatively well in an otherwise difficult market for anything to do with property.
Until this quarter, the market had seen several years of continuous growth and while the number of plans is down 16 per cent year on year, the amount of money released is still up on the same period last year.
Norwich Union is predicting that the equity release market will hit £2.4bn a year in the next five years as the market becomes a mainstream retirement planning tool.
The figures to back up this argument are definitely there. The eye watering value of the UK¹s housing stock (even taking into account the 10 to 15 per cent reduction so far this year) combined with the fact that the people who own the biggest houses and who bought at the right time are much more likely to be at or around retirement age certainly show there is value in property not being used.
The development of flexible products that allow homeowners to borrow small amounts of money as and when they need to will no doubt help to increase the products' appeal to the market is wants to reach; the aspirational purchaser using equity release to pay for a new car or holiday of a lifetime.
But despite the encouraging sales figures there remains a problem with equity release: its reputation as a product of last resort. Last month¹s report by Which? described equity release in such terms and drew a lot of criticism from the industry.
There is a vast amount of money tied up in people¹s houses but until borrowers are happy to tell friends and family that they have used equity release in the same way they would talk about their mortgages there remains a significant barrier to the growth of equity release.
The lenders say we are on the cusp of a long term change, with people changing not just their opinion of the quality of equity release products but of their opinion of how and why people use equity release. If this can be achieved then NU¹s prediction may not be too far off the mark. Some equity release lawyers and brokers suggest this attitudinal change has yet to filter through to any significant degree but there are lots of things changing in society and in society¹s attitude to financial services some of it good some of it bad, so perhaps that time has come.
11th November 2008
Thank goodness that Safe Home Income Plans have taken the bull by the horns. As stated in a previous blog and in more detail below, Andrea Rozario the Boss at SHIP has called on Trading Standards to take action against sale and rent back companies that are misleading consumers with their websites or advertising.
This trade body, SHIP, that represents 90 per cent of regulated UK equity release providers, has requested that clear guidelines be established for sale and rent back advertising and websites, and substantial fines be given to those who make misleading claims.
SHIP claims that many existing websites are misleading because they fail to inform consumers up-front of the risks associated with entering into a sale and rent back scheme.
It is also upset that sale and rent back providers are making misleading comparisons with FSA regulated equity release products.
As a result SHIP has called on Trading Standards to insist that sale and rent back companies have to make clear in their websites and advertising exactly what they do and do not offer, and for them to be fined if they do not do so.
SHIP sent a letter on the 11 November to the head of Trading Standards and a copy to the Advertising Standards Authority (ASA), the Financial Services Association (FSA) and the Office of Fair Trading (OFT), asking for these measures, as well as providing examples of how these providers have been misleading consumers.
Some of the claims have been considered sensationalist by SHIP and play on potentially vulnerable homeowners without presenting a balanced view of the products concerned.
Sale and rent back is presented as the 'ultimate solution' which could potentially lead homeowners who are in a susceptible position to make an inappropriate decision.
Last month, the OFT issued the results of a six month investigation into the sale and rent back industry, with a recommendation that the FSA regulate the sector.
Andrea Rozario, director general of SHIP said: "At the moment the sale and rent back sector is growing unchecked and aspects of it could present a real danger to consumers. It is important, now more than ever, that this sector is forced to offer clear factual information, and penalised if they do not.
"For this reason we have sent a letter to Trading Standards, outlining our concerns and seeking a meeting to discuss the situation. Ultimately people need to be able to understand the risks involved in a sale and rent back transaction, however currently this is not always the case. To support this, SHIP recently compiled a "Do's and Don'ts" checklist for anyone considering sale and rent back, to show there is no comparison with regulated equity release."
"We believe that the ethical companies in the sale and rent back sector will welcome these recommendations, as they will not want to be tarred with the same brush as those who are misleading consumers."
14th October 2008
I hear that there is a problem with houses being down-valued in that it may not be possible to raise the amount that is required.
SHIP responds to Which? equity release report
Andrea Rozario, Director General of Safe Home Income Plans (SHIP), the trade body for equity release, responds to the Which? guide published today: "It seems to me that Which? has a very outdated view on equity release and has not taken into consideration the market advancements of the past decade, let alone the last twelve months.
"Equity release products offer increasing flexibility - there are now products that offer the security of fixed rates with little or no redemption penalties, and recently we have seen rates falling, in stark comparison to the mainstream mortgage market.
This, coupled with safeguards offered by SHIP members and compared to normal mortgages, not only means that the products are safe, but also incredibly flexible, offering people options that they might not otherwise have considered, which could vastly improve the quality of their lives.
Equity Release is most definitely not an option of last resort but a logical consideration for those considering how to fund their retirement. It offers a guarantee that older people can stay in the homes they know and love, with no monthly rent and a no negative equity guarantee.
All SHIP providers recommend that those thinking about equity release seek qualified advice and involve their families in any decision making."
Well said Andrea - I think it's highly unlikely that Mr Spiers has an in-depth knowledge of Equity Release. However, your comment about little or no redemption penalties! I know of only one lender with No Redemption Penalties so let's get that straight.
Equity release last resort for pensioners says Which?
Pensioners struggling to make ends meet should only turn to equity release if there is no other option, according to a new Which? essential guide published today.
In its Care Options in Retirement guide, the firm said that rising living costs and the increased cost of long term care, equity release may seem like the answer to financial problems faced by people after retirement.
The report said equity release schemes can be very expensive, inflexible and leave people with little or no equity in their home, severely limiting their choices later in life.
Philip Spiers, co-author of Care Options in Retirement, said equity release might seem like the solution for any pensioners struggling to make ends meet this winter. He added: “These schemes provide income while enabling you to stay in your own home. However, if your circumstances change you might not have enough money remaining to fund alternative accommodation, and money received through equity release may seriously alter the amount of benefits you are able to collect.”
I have to say that I agree with the statement above..... to a certain extent.
Every professional Independent Financial Adviser has the ability to provide an in-depth analysis of all the State Benefits to which you are entitled. There is professional specialist software available. It will be a good test of the Equity Release Adviser to ask them which software they use.
It is essential to get a full report from the person advising you. Get an assessment to confirm the benefits you may be "entitled to" in the future - so you can take this into consideration.
Friday 19th September 2008
Thursday 4th September 2008
Congratulations to Ross Milnes of Sprecher Grier Halberstam LLP who sorted out the case below from 23rd August - Is this a first in Equity Release? They sent the money through to the generous hearted brother in law. Very impressed with their fee charges as well. I gather they have perfected a method that some providers adore.
I learn of this new venture which sounds very exciting from the clients point of view. I think I'll be writing about what this team has to offer in more detail over the coming weeks.
Wednesday 3rd September 2008
Given that house prices are still falling and are likely to continue to do so, it is becoming more apparent that I will need to tread very carefully when considering the right equity release product for your circumstances – especially if you need to move after a fall in house prices.
I will have to start by scrutinising lifetime mortgage companies’ terms & conditions on portability. These are heavily dependent on a number of financial factors, including house price inflation. The upshot is clear – there is a real likelihood of there being no guarantee you can move later on.
Happily for you, home reversion plans are not affected in the same way.
I have been carefully checking the Terms & Conditions detail of the Retirement Plus Property Plans for instance and can confirm that you will become joint owners of the property with them– allowing them to more readily transfer their relationship to another suitable property if you need to move.
I always check out the exact facts on each equity release plan before recommending it to you. This is because it’s the Treating Customers Fairly thing to do.
Saturday 23rd August 2008
Is this a first in Equity Release?
A 61 year old client with a wife aged 60 had no children. He was approached by his brother and sister in law who had built up £109,000 on credit cards. They had drawn down the maximum cash amount against each card of the 17 cards in their names. They used the cash available on these cards as initial deposits to buy two commercial properties. These were rented to tenants. Their rents were covering both the minimum repayments on the credit cards and the interest on the commercial mortgages. As the property values grew, he considered selling one and realising some profit. But the credit crunch hit, and he couldn't get the price he wanted. So what to do? The client asked a mortgage broker for his advice. The mortgage broker wrote him the following letter.
"Following my research into raising in excess of £109,000 to reduce your brother in law's liabilities until the sale of his commercial property is complete. The way the market is at the moment, it may take a year to get a fair price on it if the investors make an offer less than £230,000 but eventually the market will recover . I understand that he would rather hold out for a good profit than sell now at little to no profit. This is why you have asked me for my recommendations.
These are the current options available:
OPTION 1
If you were to purchase his commercial property at say £230,000, it would need at least a 30% deposit , £69,000 plus the fees involved of approx £5900.
A repayment mortgage of £161,000 is £l500 pm at 8% but the £14,250 pa rent produced would only cover a mortgage of £120,000. In addition to this it could take around four months to complete. So I am discounting this. Added to this the breakdown of the fees would be £2300 Stamp Duty, £1000 Legal fees, £900 for "a Pinders report" on the property and the business and a lender fee of 1% at £1700. Total £5900.
OPTION 2
With your own Buy to Let property, your current lender will not lend an additional £100,000 as the rent isn't sufficient to cover the amount required. A second charge and loan on it would be at a rate of around 12% and fees of at least £2500. So this is not the answer either.
OPTION 3
Your personal pensions will currently produce a tax free lump sum of around £41000. I am looking at an option where you can take the Tax Free cash but leave the balance still invested to take as income at a future date. This would be one way to partially reduce their debts.
OPTION 4
A 12 month Bridging loan is possible but with fees of £1395 and an interest rate of 21% and a maximum loan of £50000, this is similar to the current credit card rate and is unacceptable.
OPTION 5
I have attached the costs involved using an plan prepared by Peter Maxwell-Lyte, an expert in equity release.
a) The interest rate is 6.8% APR with no penalty on repayment apart from an admin fee of £125.There are no Early Repayment Fees with this Lifetime mortgage. It is the only one of it's kind in the market today.
b) The maximum amount available based on your valuation of your house at £548,000 would be £109000.
c) The interest is rolled up and added to the debt when it is repaid.
d) There is no valuation fee. A lender fee of £595. A telegraphic transfer fee of £35. Solicitors costs will be £350 + VAT and disbursements."
However, when it came to the valuation, the clients house could only release £93,000 as it too had tumbled in value. However, it was still the best option.
Tuesday 5th August 2008
I learn that a new Equity Release Community will be announced later in the year. This will be very good news for people looking for an adviser and a solicitor near their home.
Monday 4th August 2008
Many changes for the better over the last month. Norwich Union have revamped their Lifetime product range.
Dunfermline Building Society also produced some interesting new products.
Still finding Retirement Plus are offering the best level of service in the market thanks to Paul Daughtrey - a very diligent man. Although we had a tiresome experience with a man who having decided about a Reversion Plan, withdrew when he was told to get the damp in his house sorted out. This was very frustrating as so much work had been done on his behalf. Still as I said to him The pain of change is forgotten when the benefits are realized.
Friday 20th June 2008
I have just read a useful article from Peter Turley of New Life Mortgages which follows:
Early repayment charges on lifetime mortgages
The traditional market for lifetime mortgages – which is now rapidly changing – has been for customers to supplement their retirement income through releasing cash either in the form of lump sums or regular income. The thought of repaying the loan voluntarily is, for these customers, not a concern or a priority at the point when the loan is taken out, however circumstances can, and often do, alter over time.
Increasingly however, lifetime mortgages are now being treated as a financial planning tool and often customers and their advisers will enter into such transactions knowing that a specified “financial” event is due to take place at a particular or possibly unknown point in the future. This could be in connection with pension planning, insurance policy maturities or inheritance tax mitigation.
In any of these circumstances it is important that the costs of repaying the loan early can be clearly identified and quantified so that the overall costs – both actual and potential - of entering into the transaction can be taken into account at the outset.
What is clear is that lenders do need some kind of recompense where customers choose to repay their loans early as all the funding for lifetime loans is dependant on them converting short term variable rates into lifetime fixed rates – making certain assumptions on anticipated mortality rates. Where customers “select against” the lender and voluntarily repay their loans, break costs are incurred and it is reasonable for the lender to seek some kind of reimbursement.
There are clearly at least two perspectives on what the preferred approach should be in making these charges – that adopted by the lenders and alternatively that viewed from the customers requirements. Can the two be reconciled? Probably the short answer is “no” because the customer would always prefer to pay zero. However, lenders can go some way towards treating customers fairly by enabling them to know in advance when the charge will be made and how much it will be.
Thus, many lenders simply say that if the loan is voluntarily repaid within, for example, the first 5 years a charge of say, 5% of the amount repaid will be made by the lender. This varies in practice with some lenders charging nothing and some up to 7% in year one falling to 1% in year 7. Others charge a fixed 5% in the first 5 years but then 1% in years 6 to 10 and yet another charges 5% of the amount repaid in years 1 to 7, 4% in year 8, 3% in year 9 and 2% in year 10.
These charges are typically based on an average cost predicted by lenders and do not therefore necessarily reflect the actual costs incurred at the time. However, what all of these charges have in common is that they are easily understood, plus everyone involved knows exactly when the charges will be made and how much they will be. In this way advisers and customers can plan for the future and know at the outset what they are getting into.
The alternative approach adopted by several lenders is to make charges based upon market conditions at the time when the customer repays the loans voluntarily. This is called “the mark to market” approach and can be said to more accurately reflect any actual break costs incurred by the lender. Examples of these charges are for them to be made, linked to the performance of specific long term gilts at the point of redemption and as such can be levied at any time in the loan cycle i.e. these charges are potentially for the life of the loan and not for a fixed period.
Because such charges are open-ended both in time and quantum, some lenders have capped the potential charge at 25% of the amount loaned and this could be further mitigated by taking into account the residue of the anticipated loan term.
The two approaches are radically different but what is clear is that early repayment charges should be treated as an important factor in the advice and recommendation process, even if customers may not rank these accordingly at the outset. Who knows what lies around the corner?
Peter Turley, Sales & Marketing Director, New Life Mortgages
Saturday 9th May 2008
PUTTING YOUR MORTGAGE "ON HOLD"
I spoke to Mike Philps at The Coventry and he tells me about an interesting development in these credit crunch times. Because The Coventry don't have an Early Redemption Penalty, more and more people with plenty of equity in their property, in their early sixties, are using money from their homes to clear their mortgages now. They cannot sell their houses in this current climate and rather than sell now and trade down to a smaller property. They are clearing the monthly repayment mortgage and effectively putting it 'on hold' and releasing additional money to live on. They have decided to use Equity Release to bridge the gap. This is extraordinary as Lifetime mortgages are called lifetime for a specific reason. Now people have discovered that they can make their lives much more comfortable and manipulate the system with these NO ERP Lifetime Mortgages. How soon before other providers follow suit I wonder?
Friday 8th May 2008
NO MORE LIFETIME MORTGAGES FROM Partnership Assurance
For impaired lives, people who can get a better deal as a result of their state of health, I learn that Partnership Assurance can't get hold of funds so have closed the door on lifetime mortgages. They are still offering Impaired Life Reversion Plans but then so are many others. I am impressed with the service from Retirement Plus who come back to me with a quote for an impaired life cleric in Oxford in only a few hours. Paul Daughtrey is a competent worker.
Thursday May 1st 2008
ANDREA ROSARIO - THE SCENE STEALER
Went to the Equity Release Roadshow at Lords today. Andrea Rosario's SHIP Show could be another name for it as she stole the show with her passionate and insightful delivery, without her being there, it would have been very dreary. Jonathan Wilkie gave his powerful presentation again about the legal side of equity release. But, apart from the news that Solicitors form equity release trade body called ERSA - there wasn't much apart from the Coventry as a new entrant.
Thursday 17th April 2008
I need to write about an idea which hasn't got out yet. It will help worried people who are aged over 55 and are concerned about coming off their fixed-rate mortgages and have been or are building up credit card debts.
Apparently, some 2.76 million homeowners are coming off fixed-rate mortgages this year, with an average rate of 4.8% and face much higher rates. So if they are over 55 with a low enough loan to value, there is possibly a lifetime mortgage product which could solve their problem.
Some Lifetime mortgage rates which are FIXED FOR LIFE and start from 6.1% . There's even one available where you can pay monthly 'interest-only' from 6.23% each month to avoid the roll-up of interest. This has to be a possibility for people who are finding they don't have the income that some lenders insist upon.
Some homeowners with large credit card debts with high interest rates are seriously scared that they could lose their homes if they miss a monthly payment. Latest Bank of England figures show that there was a significant increase in credit card debt last month with some commentators concluding that people were using their cards to meet mortgage payments fearful that they could lose their homes.
So if you are reading this and want a quote, our people can provide this for you - you are just call or email for help.
And don't forget with Equity Release mortgages backed by SHIP - Safe Home Income Plan - you will be safe with the No Negative Equity Guarantee so there will never be the worry of losing your home.
Thursday 6th March 2008
I don't suppose existing Equity Release purchasers will read this but I really want to explain to the Northern Rock-ers and Norwich Union-ists, existing lifetime mortgagees that they will BE TREATED FAIRLY when they have their plans checked because the high interest rates could be gobbling up the bricks in their houses much more quickly now that MUCH LOWER RATES are available. It's good that we have developed a really robust process to confirm this - it might save these existing plan holders' children's inheritances many thousands of pounds. But how to tell them? The challenge is being able to phrase an advert in such a way that it doesn't cause offence to the FSA or other powers that be! And gets a strong response.
Friday 7th March 2008
Great excitement at the announcement that at last Godiva - have launched their new Lifetime Mortgage without any Early Repayment Charge. I have received an email from a lady called Di explaining that she'll give me her support as soon as my application reaches her at the Coventry Building Society. The only other plan that had no ERCs was the Northern Rock Cash Plus plan with its hefty interest rate like all the other Northern Rock plans- so this is yet more proof that the Equity Release market is really getting it's act together. No wonder I'm so passionate about it.
Also heard via email from Stonehaven that they have lowered their interest rate to become the lowest headline rate. They are introducing Flexible Cash Release Options: New Flexible Cash Release Lite at 5.97% -the cheapest flexible product on the market for all my clients except those who are aged 60-65 and Flexible Cash Release at 6.43% In addition, the minimum initial advance has now been reduced to £15,000 and further drawdowns from the Cash Reserve Facility have been reduced to £2,000
On their Lump Sum Max product the Loan To Values have increased by a further 1% for clients up to the age of 80. The interest rate has increased to 7.21%. The LTVs are capped at 48.5% from the age of 80 and above.
So good news to finish the week.
Spoke to my good friend Nick Manuel in Cardiff and forwarded the Godiva application form as he has a potential applicant on Monday and tells me he is chomping at the bit to be able to get them happily involved with "The naked lady mortgage".
£93,000 @21% = £19,530 per annum
£93,000 @ 6.8% = £ 6,324 per annum
Thus a saving of £13,206 or £1,100 a month so a very worthwhile saving.
This is an example where equity in a house can be quite easily and speedily released and used for a most unusual reason - a loan to a relative.
Coventry blamed the cost of funding as the reason for its back-tracking. This was a surprise from a lender who just posted profits in excess of £35m, along with a massive upturn in its mortgage market share. It does not have a set date for a return, but was adamant that this is not the end for Godiva’s lifetime loans.
I have yet to talk to an adviser who has any bad things to say about Coventry - it has remained one of the few brands to stay loyal to the intermediary sector, through Godiva.
The Godiva lifetime mortgage had no early redemption charge, which meant elderly people could back out of their loan as and when they chose. One colleague agreed that it was a favourite of his, because it could be used as a secured loan - people could take it out to help fund a move or could even help family in the short-term. There may lie the main reason for the product being pulled. Long-term 30 or 40 year funds are not cheap and with the lender offering customers a long-term deal that could be redeemed without an Early Redemption Clawback, Coventry may have found that it couldn’t afford to keep this product going.
Retirement Plus managing director Duncan Young says: “A lack of an Early Redemption Clawback meant advisers could think about lifetime mortgages as a financial planning tool rather than just a final mortgage.” Young says his reversion products also do not include an ERC and he admits that redemption levels have been high.
A White Paper from SHIP
Tuesday, February 3, 2009
Safe Home Income Plans (SHIP), the equity release trade body, has revealed that it plans to publish a White Paper in the coming months, setting out exactly what the body hopes to achieve.
Director general Andrea Rozario said the paper would serve as a manifesto for SHIP, laying out its policies and looking at specific outcomes it is targeting to help develop the reputation and performance of the sector.
She added: "We are engaging with the stakeholders now, and getting their views on where they think we need to go, and how best to progress with the paper."
Jon King, managing director of Hodge Lifetime, argued that the Government needed to make its position on equity release clear, and suggested that SHIP's move may spark further engagement by the Government with the sector.
He continued: "This is a sensible way forward – it will spark some debate, but it is just a starting point. All of those within the industry that I have discussed this with have been very positive about the idea. We will definitely give Andrea our full support."
Posted at 2:29 PM | 0 Comments (Post a Comment)
Will this be the best year yet for equity release?
Tuesday, January 13, 2009
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The economy is now in a downturn and the signs are that recession will accelerate the trend for retired people to use property as a way of helping meet their financial needs. Now more than ever, joint ownership Home Reversion Schemes will be more appealing. But it's essential that you compare the differences between the two.Is it possible that there is a company pushing people hard for first appointments and insisting that they get better rates than anyone else in the industry? What are their charges? Don't fall for high pressure selling techniques. If they are pushy then suggest that they push off.
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SHIP predicts that the equity release market will grow by over £200m in 2009 to £1.4bn. Andrea Rozario is probably correct. The Coventry Building Society made a considerable impression introducing a lifetime mortgage with No Early Repayment penalty.
Posted at 1:11 PM | 4 Comments (Post a Comment)
Another week passes and still more growth
Saturday, March 15, 2008
I hear from Garry in Norfolk that I am one of 'the chosen few' who are to be included in a new cooperative where the aim is to offer a superb service at reasonable rates. There really is passion within the Equity Release community.
I had a request from someone as to how much my costs are for arranging Equity Release. Answer: £795. I hear a rumour that there is one company is charging over £900 and in addition to the procuration fees from the lender. At the same time, I have heard of one adviser who did everything for free and even persuaded the solicitor to act ProBono as the client was in dire financial straights. That's what I mean about the integrity of some of the people in the industry.
Printed out my first Coventry Key Features Illustration yesterday and it looks very good.
Posted at 12:12 PM | 3 Comments (Post a Comment)
