Issue n. 4 | October 2015
LIFETIME MORTGAGE INSIGHT B r o u g h t t o y o u b y T h e P r e m i e r E q u i t y R e l e a s e C l u b 0 8 0 0 61 2 5 4 2 3
Delivering a better journey for lifetime mortgage customers and IFAs
Don’t we owe it to our customers to take a fresh look at equity release?
By Steve Ellis, L&G Home Finance
By Craig Colton, Aviva
Page. 8
Page. 10
A 45 year mortgage is still possible...
equit
...Without income By Jane Hanlon, The Premier Equity Release Club
Improvements to products over the summer has taken the industry to a new level; voluntary payments, high LTVs and fixed ERCs was the order of the day and just what the baby boomers ordered, the look and feel of a 90s mortgage.
Within weeks demand outstripped the funds, the self employed, 55s and even soft adverse scrambled to secure applications before funds were exhausted. Something this industry has never witnessed before, proving the product specification actually met consumer demand. This highlighted that the interest payment style mortgage is the growth area for lifetime and is being driven by this huge demand to fill the VOID left by the high street. Together with new legislation, it has failed to provide for these borrowers. This includes self-certification, no repayment vehicles, fixed clear exit penalties, which is what these borrowers have been frozen out from for years. Take into account the age of 55 is now a minimum of 11 years from state retirement age, so lifetime is not necessary lifetime, but a long term fixed rate to meet the needs of today’s older borrowers that can be carried forward to tomorrow if required.
the lifetime mortgage for the over 55s with no end dates! Who would have thought a 45 year mortgage was possible… it is now. Need some help or guidance? The Premier Equity Release Club Helpdesk is the only one of its kind offering a guiding hand to advisers; from product knowledge to compliance support packages, and panel solicitors with marketing allowances. All we ask is you quote The Premier Equity Release Club for quotes and use our branded applications from our website download section. Coming up... Jane & Bob Boon from Ashford solicitors, back doing Breakfast Workshops . More info on Page 2 > Jane Hanlon, 0800 612 5423
Whoever wrote the mortgage rules must be in their 30s; the younger generations struggle to save for a deposit and if the over 45s are told they are too old, the scope for traditional mortgages is a smaller window in comparison with 7 year gilt rate at 30th Sept = 2.13% Rate supplied by Just Retirement
2 Lifetime Mortgage Insight - Issue 4 - October 2015
Breakfast workshops: “Knowledge of lenders criteria can improve your cash flow” Hosted by Jane Hanlon, The Premier Equity Release Club and Bob Boon, Ashfords LLP
A 2 hour session of KEY factual information to put you a class up above the rest – details will be announced shortly and will include one event in West London in late October and one event in Birmingham mid November.
• A question and answer session to finish
Your access to sharing the right way to equity release.
• Support material to take away and CPD sent by email after event. After the event there will be the option to discuss any compliance support requirements .
Jane and Bob held two breakfast workshops in July and the feedback from them was excellent.
Jane & Bob would be delighted if you would like to join them.
Feedback from a London attendee:
“First class - I learnt more in 2 hours than I had done in years.” West London - 20th October - High Wycombe Birmingham - mid November - details TBC The workshops, will cover: • Meet the innovative and invited lenders • Jane will cover all remaining lenders’ unique selling points
Please contact Jane if interested:
• Bob will cover marketing and identifying new opportunities
Tel: 0800 612 5423 Email: jane@thepremierequityrelaseclub.co.uk
Brought to you by The Premier Equity Release Club. Contact our free helpdesk on 0800 612 5423.
Legal & General offer *EXCLUSIVE* to The Premier Equity Release Club By Jane Hanlon, The Premier Equity Release Club
EXCLUSIVE: ONLY through the CLUB: FREE uncapped valuations replacing the valuation refunds, on the following products on NEW applications from 6th October, with L&G reserving the right to withdraw at anytime. Flexible PLUS Flexible PLUS 2% C/B
5.54% (monthly 5.40%) Min £10,000 & Min Val £100,000 (X local authority houses £150,000) 5.74% (monthly 5.59%)
Lump sum Lump sum 2% C/B
6.04% (monthly 5.88%) Min £20,000 & Min Val £100,000 (X local Authority houses £150,000) 6.24% (monthly 6.07%)
Lump Sum PLUS 6.34% (monthly 6.16%) Min £50,000 & Min Val £200,000 Lump Sum PLUS 2%C/B 6.54% (monthly 6.35%) PLEASE NOTE: Website and sourcing systems need updating so valuation figure will show on KFI, but will NOT be charged (benefiting the client) with exception of the Flexible, below: Flexible @ 5.25% (5.13% monthly) & 5.45% (5.32% monthly) is excluded. Therefore valuation fee required and non refundable. Broker Commission 2.15% min £500 max £10,000 and 1% drip on reserve. Legal & General reserve the right to withdrawal at anytime.
Large Loans over £200,000*** get paid within 24 hours of completion up to 2pm 24th December. EXCLUSIVE: Special offer - solicitors fees from £350 + VAT +disb with the CLUB paying a £50 marketing allowance to club members using the lender/ solicitor route Peter Barton with national coverage including six offices: whole of South West/ East incl. London office or you can use local solicitors and even home visits with slight extra cost over the £350 + vat and dis. Full service law firm, on a NO completion NO fee. Website: www.ashfords.co.uk Email: equityrelease@ashfords.co.uk STANDARD PACKAGE: • Conveyancing freehold registered • Completion of lenders solicitors paperwork • Completion of the ER certificate at any of Ashfords offices • Clients can be seen at all offices for signing at no extra charge • Transfer of funds • Request for redemption statements (current lender may charge client) • No additional charge for redemption of mortgage • Proof of identity • File storage. Quotes available for: Purchases, freehold unregistered, leasehold, lease extensions, title transfers home visits to sign certificate if required . Local town solicitors to sign certificate if required. £350 standard package available to 31st December 2015.
Contact the Jane for more info: Tel: 0800 612 5423 Email: helpdesk@thepremierequityreleaseclub.co.uk Visit: www. thepremierequityreleaseclub.co.uk
3
4 Lifetime Mortgage Insight - Issue 4 - October 2015
Are you seeing the Big Picture? By Dave Harris, Managing Director, more 2 life
Brian is 70 years old but he doesn’t look it. He’s reasonably fit and takes his health seriously. He owns a house valued at £195,000 and could get an LTV of 32.9%1 (£64,155) based on standard market rates. But there is more to Brian than meets the eye... By asking just a few simple health and lifestyle questions, Brian’s adviser discovers that he was recently diagnosed with type 2 diabetes and also has angina. He takes regular medication for these conditions so they don’t affect his health on a day-to-day basis. So, if his adviser had simply asked Brian ‘Are you healthy?’ Brian would probably have replied ‘Yes’. Lucky for Brian, then, that his adviser went the extra step of ensuring he asked the health questions that uncovered Brian’s ‘unseen’ medical issues. As a result, Brian’s LTV increases from 32.9% to 46.4%1- equating to a loan of £90,480, more than £26,000 higher than he would have otherwise received. This additional lending facility could be useful in one of three ways: 1. If Brian was looking for a ‘max cash’ solution – that is, the largest possible loan he could get – clearly the revelation of his health problems will have
secured him a much higher loan 2. If instead Brian wanted a smaller initial loan but with the flexibility to take more in future drawdowns, the higher LTV secures him a much bigger facility from which to access more cash should he need it 3. The higher LTV could also be used by Brian to ensure a larger portion of his home’s equity is guaranteed for his beneficiaries after his death, assuming he doesn’t take the ‘max cash’ option and leaves the rest of his facility untouched Brian’s adviser saw the ‘bigger picture’ as a result of asking health questions. All sorts of health and lifestyle issues can qualify a client for an enhanced LTV. In fact, we estimate that 75% of people aged 65 and above could qualify2, but only about 1 in 6 actually end up with an enhanced loan3.
Even if Brian had decided not to proceed with an enhanced product, he was at least aware of the option – for some clients taking out a lifetime mortgage today that simply isn’t the case. And given that TCF Outcome 4 requires advisers to take all of their client’s circumstances into account when making recommendations, the importance of asking health questions comes into even sharper focus. If you want to find out more about Brian, and our other ‘Big Picture’ case studies, go to the more 2 life website and click on the ‘Big Picture’ links.
Contact more2life Tel: 08454 150 150 Email: info@more2life.co.uk Visit: www.more2life.co.uk
1. Source: more 2 life figures for a healthy 70 year old versus the same client with type 2 diabetes and angina 2. more 2 life estimate based on Age UK Later Life in the UK, Department of Health National Diet and Nutrition Survey and ONS population data 3. Based on more 2 life new business data and market analysis
Brought to you by The Premier Equity Release Club. Contact our free helpdesk on 0800 612 5423.
“Equity release helped us clear our mainstream mortgage” Mr and Mrs Richards, Cheshire By Alice Watson, Product and Communications Manager, Retirement Advantage
For those approaching retirement, the biggest financial worry is often carrying residual mortgage debt into retirement. A recent study by Saga discovered that one in three people over the age of 50, and one in seven over the age of 70, still have a mortgage. On average those with a mortgage in their 70s have £40,000 left to repay. For those with no savings or repayment vehicle in place, finding a way to clear the mortgage debt can prove stressful as Banks and building societies are restricting their underwriting criteria and tightening their lending to those aged 65 or over. Where the mainstream market is reducing the options available to older homeowners, the lifetime mortgage market is becoming increasingly flexible. The standout innovation in the sector has been the approach to interest roll-up. Products which allow monthly or ad-hoc payments to be made are now readily available, allowing borrowers to maintain control over their mortgage and reduce, or even stop, the impact of interest roll-up. This development means that the way people are using a lifetime mortgage is changing, and a growing trend is to use the money raised to clear an existing mortgage. In the first half of this year, 45% of Retirement Advantage customers used some or all of the equity they released from their home to clear residual mortgage debt – which is what Mr and Mrs Richards chose to do. Mr and Mrs Richards had an interest-only mortgage with an outstanding balance of £25,000. When they were two years away from the end of their mortgage term, their
mortgage Lender started to write to them asking how they were going to clear the outstanding balance. They didn’t have a sufficient means of paying off the mortgage and became worried. They approached their Lender and asked for an extension but were declined. They looked at other mainstream mortgage providers, but because Mrs Richards was 57 they were turned down as the mortgage term would extend beyond her retirement age. Concerned about the options available to them, they went to see a financial adviser. Their adviser looked into their circumstances and decided upon equity release. He recommended an interest paying lifetime mortgage, which allowed them to release a lump sum of cash to clear their existing mortgage. They could also continue their routine of servicing the interest each month, safeguarding the remaining equity in their property. In the case of Mr and Mrs Richards, a lifetime mortgage was a sensible solution to their interest-only shortfall, and we’re expecting to see this trend continue to grow.
Contact Retirement Advantage Tel: 0800 068 0212 Email: er-support@retirementadvantage.com Visit: www.retirementadvantage.com
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6 Lifetime Mortgage Insight - Issue 4 - October 2015
Equity Release Market Report Case Study Mr & Mrs Sutton, LV= By Faye Moutzouri, The Equity Release Council Edward & Anne Sutton, aged 74 and 69 respectively took out an LV= flexible lifetime mortgage against their property in Worcestershire in January this year. They withdraw an initial sum of £20,000 with a guaranteed reserve of a further £40,000 as and when they need it. At the time their property was valued at £240,000. They found a local specialist adviser through the Equity Release Council’s website, recommended to them by a former colleague, who answered all their queries and made sure that they only borrowed an amount they needed. They had also previously discussed the possibility of using equity release with their children, who encouraged them to go ahead with it.
to take out equity release, especially in having the support of our children. “With equity release we’re able to fully enjoy our retirement without fear of how to meet any unexpected costs. It also gives us the luxury of being able to visit our family in Australia when we like, something we would have struggled to do otherwise. There is also the added peace of mind that should we need to, we have guaranteed reserve we can tap into. We’ve even recommended equity release to our daughter-in-law’s parents to give them the security for retirement that we enjoy.”
Withdrawing equity release from their home has put the Sutton’s minds at ease for retirement, having been aware that if there were any unexpected costs or home improvements to be made, their current income would not be sufficient to cover them. It also allows the Suttons to visit their children and grandchildren who emigrated to Australia without having to worry about how to pay for it. Mrs Sutton commented: “We’d heard some bad stories about equity release in the past but we could not be happier with the service we’ve received. Our adviser fully put our minds at rest and LV= were hugely efficient in advancing our loan providing us with clear advice and instruction. We’re thrilled we decided
Contact The Equity Release Council Tel: 07557 856 705 Email: fayem@equityreleasecouncil.com Visit: www.equityreleasecouncil.com
Brought to you by The Premier Equity Release Club. Contact our free helpdesk on 0800 612 5423.
Rate changes from 1st June 2015 Lender
Date change
Product
Original rate
Current rate
Aviva
6/7/2015
Flexi
7/9/2015
Flexi
6/7/2015
Flexi Enhanced
5.19%
7/9/2015
Flexi Enhanced
5.19%
20/5/2015
Lump
7/9/2015
Lump
11/8/2015
Aviva arrangement fee reduced to ÂŁ5
5.28% (standard 6.09%)
(standard 7.39%)
Rate change v
0.17%
v
0.21%
^
0.30%
5.28%
5.78% 5.78%
0.0%
Please note Aviva assess each case individually Hodge
Just Retirement
Legal & General
LV=
Retirement
4.39%
-
Flexi Life
6.19%
-
Lump
5.99%
-
Roll up
5.59%
15/7/2015
Roll up
5.59% (standard 5.99%)
5.42%
v
0.17%
5/6/2015
Lump sum
5.99%
6.29%
^
0.30%
15/7/2015
Lump sum
6.59%
^
0.30%
15/7/2015
Enhanced
6.39%
6.59%
^
0.20%
12/6/2015
Flexi
5.05%
5.25%
^
0.20%
27/7/2015
Flexi Plus
5.44%
5.54%
^
0.10%
27/7/2015
Flexi Plus CB 2%
5.74%
new
27/7/2015
Lump
5.90%
^
27/7/2015
Lump CB
6.10%
new
12/6/2015
New MAX LUMP
Increase LTVs
6.05%
new
New MAX LUMP
= CI increase LTVs
6.25%
new
29/9/2015
Lump Sum Plus
6.05%
6.34%
higher ltv
22/6/2015
Flex
6.24%
6.04%
v
0.20%
22/6/2015
Lump sum
5.99%
5.79%
v
0.20%
Tailored 70
5.69%
6.01%
^
0.32%
Tailored 70
6.01%
6.11%
^
0.10%
Tailored Enhanced
6.43%
6.64%
^
0.21%
7/7/2015
Tailored Enhanced
6.64%
6.75%
more2life 7/7/2015
5.75%
0.15%
0.11%
18/9/2015
Tailored Enhanced
6.75%
6.54%
v
Partnership
24/7/2015
Lump
6.35%
6.65%
^
0.30%
Pure
24/9/2015
Drawdown 1
6.49%
6.34%
v
0.15%
24/9/2015
Drawdown 2
6.29%
6.14%
v
0.15%
15/7/2015
Lump 1
6.49%
6.79%
^
0.30%
15/7/2015
Lump 2
6.29%
6.59%
^
0.30%
28/5/2015
NEW MAX DD1
Increase LTVs
6.54%
29/6/2015
MAX DD1
^
0.20%
28/5/2015
NEW MAX DD2
29/6/2015
MAX DD2
22/6/2015
Interest Gold
5.60%
5.99%
^
0.39%
10/7/2015
Interest Gold
5.99%
6.52%
^
0.53%
22/6/2015
Interest Gold Flex
5.81%
6.20%
^
0.39%
10/7/2015
Interest Gold Flex
6.20%
6.73%
^
0.53%
29/9/2015
Interest Platinum
6.73%
Back
29/9/2015
Voluntary
6.72%
Back
29/9/2015
Lump
6.37%
Back
Retirement Advantage
6.74% Increase LTVs
6.33% 6.54%
0.20%
7
8 Lifetime Mortgage Insight - Issue 4 - October 2015
Delivering a better journey for lifetime mortgage customers and IFAs By Steve Ellis, Director Lifetime Lending, Legal & General Home Finance
The popularity of lifetime mortgages has increased sharply since the start of the year. This is due to a combination of factors, including the rising cost of housing as well as people living for longer, meaning they need more money in retirement.
The latest figures from the Equity Release Council show that the number of equity release cases increased by 11% in the second quarter of this year and this trend looks set to continue over the coming years*. The increase in volume is likely to drive product innovation in the sector, but it will also mean it is more important to process cases quickly and efficiently. The current system where paper applications are sent between surveyors and solicitors is outdated and can mean customers are waiting up to four months to receive their money. On top of this, there is also a risk of documents getting lost in the post and it can be hard for customers and IFAs to keep track of how their applications are progressing. To help improve the process for customers and IFAs alike, Legal & General Home Finance are working to launch a new online portal which allows advisers to apply for and track cases online. To use the portal, advisers will need to set up a profile and add in the details of their clients. Once an application has been made, they will then be able
to follow the case whilst the survey is carried out and the offer is made. Solicitors will also be able to log in and use the system, which means that they too will be able to monitor how a case is progressing as well as having an easy way to keep track of all the details of a case. This new portal, the first of its kind in the lifetime mortgage sector, will therefore make the process of applying for a lifetime mortgage very much quicker.
Contact Legal & General Home Finance Tel: 0333 0048 444 Email: info@landghomefinance.com Visit: www.landghomefinance.com/advisers
* Equity Release Council statistics 28 July 2015 http://www.mortgagesolutions.co.uk/better-business/equity-release-closing-the-knowledge-gap/?ac=2&as=85
Brought to you by The Premier Equity Release Club. Contact our free helpdesk on 0800 612 5423.
Equity release funds can be used to extend a lease and may add extra value By Peter Barton, Ashfords LLP
One of the most common queries we get asked from clients and referrers is whether a lease of a house or flat can be extended? Normally this is because a lender requires a set number of years to remain before lending. Equally, a purchaser may simply want a longer lease. The simple answer is yes! The difficult answer is how quickly.
Land Registry. Depending on the premium Stamp Duty Land Tax may also be payable.
There are two ways in which you can look to extend a lease. The first is by way of an informal approach to the Landlord in agreeing terms for a new lease. A premium is typically payable for the extension and the Landlord will commission a valuation report. The Landlord’s legal and professional costs are also as a general rule payable by the Tenant/purchaser.
An informal extension can be quicker than a statutory extension but much is governed by how the Landlord engages with the process.
The second is by way of a statutory process. This differs slightly depending on whether it is a house or flat lease, as does the qualifying criteria. In both cases however the original lease must have been granted for a term in excess of 21 years and the current Tenant must have owned the property for at least 2 years. A premium is payable in the case of a flat lease extension and in the case of a house lease, a ‘modern’ ground rent can be charged. The Landlord is also entitled to a certain amount of costs to be paid and these are set out in law. Once completed, the extension will create a new lease in place of the old lease that will need to be registered at the
Whichever route is chosen, it is important to seek specialist legal advice in negotiating and completing an extension and here at Ashfords, our team are more than willing to assist. Always worth checking out with the technical team of specialist at Ashfords 01392 334 123.
Contact Ashfords LLP Tel: 01392 334 123 Email: p.barton@ashfords.co.uk Visit: www.ashfords.co.uk
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10 Lifetime Mortgage Insight - Issue 4 - October 2015
Don’t we owe it to our customers to take a fresh look at equity release? By Craig Colton , Managing Director, Aviva Equity Release
The birth of the new pension freedoms represented a watershed moment. There is now a responsibility to consider all retirement options afresh – including equity release. The annuity isn’t dead... it’s just got company While headlines proclaiming the “death of annuities” have been premature, it’s clear that the product will not dominate retirement planning as it once did. At the same time, the appeal of drawdown has increased. But it would be misguided to limit retirement planning to these two products alone. In ensuring careful balance, all options must be placed onto the customer’s retirement planning scales. And this, of course, includes equity release. New landscape, same uphill battle? The landscape may have changed, but one thing hasn’t: many savers still face a struggle to fund the kind of lifestyle they want in retirement. Our research found that the typical over 45 year old expects to need an annual income of approximately £12,500 to fund their retirement. But the same research also showed that the typical saver can expect only £10,000 a year, even when they factor in state pension and private savings. So how might they make up the shortfall? Perhaps the answer lies here: Our research found the average 45-74 year old has a property worth £286,000, compared to typical savings and investments of just over £53,000. 1. Mintel research, May 2015: 2. Record sales: Equity Release Council
To fail to consider this most valuable asset must surely be to fail the interests of the customer. Busting myths and spreading awareness The industry continues to counter present-day misconceptions about equity release caused by poor practices dating back to the 1980s. Improved customer awareness and understanding look likely to boost appetite for equity release. But there’s still some way to go. Research from Mintel found that about one in three thought they had to own their home outright before using equity release while one in five over 45s hadn’t even heard of the product. There is, however, evidence that an appetite for equity release is growing. In the first half of 2015, 10,000 new customers took out plans. This is more than a niche product. With increasing life expectancy, evidence of saving shortfalls, a market shaken by the new pension freedoms, and more than 6 million homeowners in England alone over the age of 55 (Mintel), it’s not hard to see the opportunity for customers and our industry. It’s time for our industry to help our customers afresh about equity release.
Contact Aviva Tel: 0845 300 2837 Visit: www.aviva-for-advisers.co.uk
think
As equity release lending reaches record highs, many more people could benefit from equity release By Nick Brown, Propositions Manager – Lifetime Mortgages, Just Retirement
Recent reports from the Equity Release Council showed that equity release lending has reached the highest figure since 2002, hitting £384.3m in the second quarter of 2015.
Yet despite the growing numbers of people that equity release has helped, research from the Equity Release Council found that many more still face financial worries in retirement. For some this means that they go without rather than asking for help. For example, the research found that some 65-69 year olds were so worried about money that: • 21% skipped a meal • 30% experienced stress and had at least one sleepless night • 17% felt embarrassed that they couldn’t afford something • 16% felt cold due to an unpaid bill. For many, this is just not necessary. Retirement is a time for your clients to enjoy their new freedom – when they can finally do all of the things that they didn’t have time for before. And equity release could be just what they need to do this - without the stress and worry of having to sell their home. Unlock some of the value from their home The Equity Release Council’s research found that, on average, homeowners over 55 have £241,000 of housing wealth that they could draw on. It could mean that the holiday that they have always dreamed of, the new car that they have their eye on, or those home improvements are closer than they think. We believe ‘everyone deserves a just retirement’, so for us
customers always come first. Our equity release products have helped to free up more than £2 billion in tax-free cash from our customers’ homes, and our service is award-winning. We’re the proud winner of ‘Best Retirement Provider’ at the 2014 Professional Adviser Awards and have also been awarded 5 stars for our service in the Mortgage Provider Category for the last 7 years at the Financial Adviser Service Awards. How much could your client release, and what would their loan to value rate be? Our quick and easy calculators can: • Give an indication of how much a client could release with our Lump Sum Plus Lifetime Mortgage, factoring in health and lifestyle conditions for enhanced loan-to-value rates if you want it to • Use a range of assumptions to determine the costs and benefits to your client of our Roll Up Lifetime Mortgage Find out how we can help you help your client with a Just Retirement Lifetime Mortgage - contact our dedicated team to find out more.
Contact Just Retirement Tel: 0345 302 2287 Email: support@justretirement.com Website: justadviser.com/equity-release
The Premier Equity Release Club Sharing with you the right way to do Equity Release
www.thepremierequityreleaseclub.co.uk helpdesk@thepremierequityreleaseclub.co.uk 0800 612 5423