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LIFETIME MORTGAGE INSIGHT
I ssue 7 - Septemeber 2016
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Modified affordability rules will spur equity release product innovation
By Alice Watson, Product and Communications Manager, Retirement Advantage Page 3
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The Adviser Guide to Equity Release By Rachel Pease, Marketing and Communications Manager, Pure Retirement Page 4
Adviser’s turn to “Lifetime” to replace the BTL market! By Jane Hanlon, The Premier Equity Release Club
So what’s new? • New updated IRESS sourcing • New lender - OneFamily • New variable rate – linked to CPI from 2.96% • New borrowers failing to secure lending into olderage
The time is right; if you haven’t used The Premier Equity Release Club desk then perhaps it is time to give us a try. We help and support advisers of all levels to match clients’ needs and requirements and we work with you to offer alternatives, read on for a couple of sample cases: Case 1 Mother resident but in 3 names.
89 year old mother owns 50% of her house worth £400,000, with her 2 sons (father left 50% between them) and they now need to clear a mortgage £100,000. Sons are not resident and aged 51 and 52, so not old enough to be considered for lifetime. As it stands they are not able to remortgage, so what if the sons sign the house over, then the house is in the mother’s sole name and, if in the future care is required, then the house could be sold and £300,000 funds
used to pay for care. Consider a second charge for sons but lender will not allow a 2nd charge to rank behind their first charge.
An alternative is to put the house in her sole name and raise the maximum which would clear the mortgage and create another £100,000 to share between the sons, so part of the inheritance could be paid with the mother able to remain safely in her home. The asset is reduced by £100,000 so that any care fees could only be taken from the sale less £200,000 + accrued interest .
Case 2 House with holiday cottage in garden wanting reserve.
Client wants £35,000 on a property of £200,000 but has solar panels (rented) and has a holiday cottage at the bottom of the garden. Her request is that she requires more
on reserve and that she would like the option to make payments but not necessarily regularly from the holiday cottage lets. Options: • Split the title - extra costs
• Try and get a lender to take full title
• We can help you - lenders who will take rented solar panels
• Lender who will consider the whole title • Lender that allows ad hoc option partial over-payments
• Lender that offers a reserve with facility and the option to make over payments on reserve. Case 3 Tenants in common with reserve common in 2nd marriages.
Tenants in common, one very poorly and time not on their side, wants a continued overleaf >
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Lifetime Mortgage Insight - Issue 7 - July 2016
lender that will allow an initial and a reserve as the poorly tenant has the good pensions and the healthy one will have a very limited income. The poorly one has written in their will that the partner has the right to reside but in the event of death or moving then their portion is to go to the children. The priority is that a lender is needed who will allow access to a reserve after death so the now single person can access the reserve.
We can help and point you in the direction of a lender that would allow access by a single person not inheriting the other portion of the house, to continue to access reserve funds.
Just when you thought it was simply a mortgage - as you can see, it is more and the cases are different and enjoyable to write.
range from 1.5%- 2.3% with a whole new range of product, is it time to take a look? Call 0800 612 5423 for any help you
Our desk is a hub of knowledge used require or email www.thepremierequityrelease.co.uk by lenders and advisers of all levels. We offer free the new IRESS sourcing system sponsored by Just Retirement, that is independent, trustworthy and compliance acceptable. It has many filters but sometimes you just need a sounding board to check that you are on the right wavelength. 7 year gilt rate at 12/07/16 = 1.38% Rate supplied by Just Retirement With Club deals on procuration fees
2016: taking (a half) year stock By Faye Moutzouri, Communications Manager
2016 is already a year where we have plenty to celebrate here at the Equity Release Council. Positive coverage and membership are ever growing in line with growth for the equity release market. Sustained growth has resulted from a continued shift towards an innovative product offering, both from existing providers and new entrants; and with new features allowing more freedom, and flexibility for consumers. We expect this is a continuous trend, and the challenge for industry and the regulator is to ensure product innovation is in line with protection and sustainability. Talking about protections, 2016 marks the 25th anniversary of The Council and the Standards which set out best practice for products and advice across the sector. The sector is maturing and after a quarter of the century we envisage a promising future. It was fantastic to see so many people from across the industry and political sphere
joining us to celebrate our 25th anniversary at our Parliamentary Reception in July. In addition, we are delighted to recently announce the launch of our online guide, the ‘Adviser Guide to Equity Release’, which has been produced and sponsored in collaboration with Pure Retirement, and many of our members. This project which has been the result of extensive work – for which we owe a debt of gratitude to all contributors for their efforts, expertise and time aims to provide a greater understanding of the market - those aspiring new entrants and those already active members of The Council - and some practical support to help them grow and develop their propositions. Dialogue with the FCA our regulator continues on very good terms and we were very pleased on the decision the FCA made in
respect of its recent modifications to affordability tests for borrowers in the lifetime mortgage space. This move will help even more people make use of options offered by lenders, as well as encourage further innovation to benefit consumers, and is a fantastic example of what could be achieved through knowledge exchange among the industry and the regulator!
As we move into the second half of the year, you should look out for our member networking events that will be taking place in August, the rebrand and launch of our website and our GCM in early December. I wish you all a fantastic summer holiday period.
Contact Equity Release Council
Tel: 07557 856705 Email: fayem@equityreleasecouncil.com Visit: www.equityreleasecouncil.com
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Brought to you by The Premier Equity Release Club. Contact our free helpdesk on 0800 612 5423.
Modified affordability rules will spur equity release product innovation By Alice Watson, Product and Communications Manager Last month, the Financial Conduct Authority (FCA) announced a change to their stance on affordability assessments for hybrid lifetime mortgages. Lenders are now able to apply for a modification to the rules which, when approved, means that interest only products do not require affordability assessments to be completed as part of the application process.
We’ve been granted this change in rules, and have launched a modified range of equity release products which do not require affordability
assessments. These enhanced products are a first in the interestpaying lifetime mortgage market and apply to our Interest Select Options.
In line with the modified rules, the products now require no proof of
income or expenditure on behalf of the applicant. There is also no need for customers to provide details of unsecured loans. In addition, the products retain the flexibility for customers to switch to an interest rollup mortgage if they wish, without facing repossession.
Critically, though, these products retain all the safeguards customers expect from equity release products. In addition to the safeguards, the financial adviser providing the recommendation will still ensure making payments is the right thing for the customer and their financial c i rc u m s t a n ce s . Removing the need for affordability assessments has greatly streamlined the process for all involved and will make access to lifetime mortgages more straightforward for more people. The equity release sector is currently enjoying a period of unprecedented growth. Lending hit an alltime high of £1.6bn last
year, highlighting how equity release is now an integral part of financial planning for retirees across the UK.
This rising popularity reflects a broader change in attitudes among retirees since the introduction of pension freedoms around this time last year. Many are now taking a holistic approach to their different types of wealth in retirement. That means embracing new products and fresh ways of generating income, not least through property, for many, their most valuable asset.
The FCA’s decision has been welcomed by the industry as a common sense move. The good news for consumers is that the equity release industry is currently awash with innovation, and it is hoped that this decision will spur further product development.
Contact Retirement Advantage
Tel: 0800 068 0212 Email: er-support@retirementadvantage.com Visit: www.retirementadvantage.com
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Lifetime Mortgage Insight - Issue 7 - July 2016
The Adviser Guide to Equity Release By Rachel Pease, Marketing and Communications Manager In light of equity release's growing recognition from UK consumers, regulators and politicians that housing wealth can, and should, play a greater role in financial planning for retirement, the Equity Release Council has recently launched The Adviser Guide to Equity Release.
The Guide is part of an adviser engagement initiative to help grow the equity release market, aimed at advisers new to the market or considering entry. With the challenges of financing a comfortable retirement, more and more people are looking to equity release as a solution, and adviser growth is critical to enable the industry to meet this growth in consumer demand. It is the adviser that drives the market, being the instigator of most of the industry marketing activity and engagement with the customer, and it’s crucial that more advisers enter into the arena, providing quality advice to customers in choosing the solution that best meets their needs.
Paul Carter, CEO of Pure Retirement commented; “It’s pleasing to see many of the major distributors bringing in new advisers and training them to be the quality equity release advisers of the future. IFAs are a natural choice for recruitment as having an understanding of retirement planning and means-tested benefits means they can quickly adapt. Many IFAs will have mortgage qualifications too, making it a simple task to bring them into the market with the appropriate support to ease the transition.”
The Adviser Guide to Equity Release offers a step by step guide to the industry and the end to end advice process, including an introduction to the market, guidance on marketing approach, as well as a toolkit of invaluable resources which will be available exclusively to advisers who take on council membership. Nigel Waterson, Chairman of the Equity Release Council commented; “Equity release is receiving
increased recognition from consumers, regulators and politicians as the realisation spreads that housing wealth can play a greater role in people’s financial planning for later life. It is our hope that the ‘The Adviser Guide to Equity Release’ will give budding advisers who have taken note of the changing landscape the confidence to build up their knowledge and understanding of equity release, so they can help more people access professional financial advice in this area. We are grateful to Pure Retirement as this guide would not have been possible without its commitment and support.”
Contact Pure Retirement
Tel: 0113 366 0599 Email: info@pureretirement.co.uk Visit: www.pureretirement.co.uk/professionals