This article provides information on the latest interest rates & changes that Aviva are making to their product range.
With the current shortage of equity release lenders, additional pressures are mounting on the remaining companies providing equity release schemes.
These lenders are now experiencing larger than normal business volumes as the number of providers has dwindled over the past 12 months. As a consequence some servicing issues are of concern, of which the biggest provider is now addressing.
Of these equity release companies; Aviva are the first to change their lending criteria & this post provides details of this in advance.
Come the 14th June, Aviva will be increasing their interest rates & lowering their loan-to-values (LTV) & details of these changes are detailed later in this article.
This is a negative step for the market given that Aviva’s Maximum Cash Release plan offers the highest cash release in the lifetime mortgage market at present.
Therefore, clients looking for financial relief by releasing the maximum possible after this date now have a reduced cash sum available. Couple this with Aviva’s recent reduction in loan-to-values on flats & maisonette’s & there is a definite swing away from higher loan values.
Aviva will now only lend on 75% of property values on flats & maisonette’s, which is a dramatic move away from lending on these abodes. Couple this with the reductions in loan-to-values which are being announced on the 14th June, means a significant shift in their lending criteria.
This will affect in particular clients looking at debt consolidation or potential other requirements that demand the maximum possible.
Equity Release Supermarket as independent financial advisers have witnessed firsthand the demand for larger advances this year alone. Predominantly, this has been for debt consolidation purposes whereby clients in retirement are now experiencing income shortfall issues as their investment returns have fallen significantly.
This has resulted in financial pressures meeting these monthly liabilities including mortgage payments, personal loans or more commonly, credit card debts.
Nevertheless, there are fresh signs within the market indicating that external forces are construing to develop new plans & ideas to drive this stagnant market forward.
We heard last week that More2 Life is introducing an impaired life roll-up equity release scheme. This is welcoming news for the market & hopefully the sign of things to come.
In the meantime the current crop of lenders can dictate in a market having little competition from other providers.
Part of the result of this is Aviva’s impending equity release scheme changes.
Aviva have announced an increase of 0.1% to the interest rates for new business on the Lifestyle Flexible Option, Lifestyle Lump Sum and Lifestyle Lump Sum Max.
Equity Release Supermarket receive an exclusive interest rate lower than that offered directly by Aviva themselves.
The new Aviva interest rates wef 14th June are therefore 6.70%, 6.55% & 7.40% respectively. On paper this doesn’t represent a large percentage increase; however given the roll-up nature of these products, this will result in £1000's difference in the future balance.
Additionally, Aviva equity release are reducing the loan-to-values on the Lifestyle Lump Sum Max by 2% for customers aged 60 or below, and by 1% for those over 60.
Even with this decrease, they currently still offer the best LTV scale in the market on all properties (apart from flats & maisonettes).
The LTV rates for the Lifestyle Flexible Option and Lifestyle Lump Sum will stay the same.
Example LTV’s on the Lifestyle Lump Sum Max (single borrower) are now: -
Age 55 - 20.5%
Age 60 - 25.5%
Age 65 - 30%
Age 70 - 36%
Age 75 - 41%
Finally, there are transitional arrangements in place which anyone considering the Aviva equity release schemes should be aware of;
Applications on the Lifestyle Flexible Option, Lifestyle Lump Sum and Lifestyle Lump Sum Max dated prior to 14th June and received by the 18th June will receive the old interest rates. Also, any Lifestyle Lump Sum Max applications will be on the old LTV scale.
Applications on the Lifestyle Flexible Option, Lifestyle Lump Sum and Lifestyle Lump Sum Max dated before 14th June and received after 18th June will receive the new interest rate. Lifestyle Lump Sum Max applications will be on the new LTV scale.
Applications dated after 14th June will receive the new interest rates. Lifestyle Lump Sum Max applications will be based on the new LTV scale.
To request an Aviva illustration or further advice on any of the issues discussed above, please contact Mark Gregory on 0800 678 5159 or email [email protected].