The announcement by Nationwide Building Society to enter the lifetime mortgage market is a great boost to the world of equity release. They are, after all, the biggest building society in the UK, and their decision to start offering products to their customers, via a third-party advice arm, is another example of equity release becoming a mainstream financial services product.
Nationwide's Equity Release Proposal
The move by Nationwide follows similar decisions by other high street lenders like Santander and Co-op, who are also both using a 3rd party firms to advise their customers. The equity release industry is thrilled with these huge announcements, especially as the sector continues to enjoy record growth, with £800 million released by UK home-owners in the last quarter alone. This shows the confidence in the sector & testament to the work being done by the Equity Release Council & alike who are driving up standards in equity release.
Which High Street Lenders Have Existing Equity Release Ties in Place?
There are existing bank/building society relationships in place to refer their customers to an equity release lender. Currently, both Santander and Co-op customers are being referred to a company who recommend Legal & General products solely. However, in their recent move Nationwide have opted to use an alternative advisory firm to provide their advice. Nationwide are therefore not providing advice themselves, nor dealing with the administration of new, or existing plans that are in force.
This reminds me of my time when I previously worked at Aviva Equity Release, where I was only able to advise on Aviva’s products, which although were good, I was aware that there may have been more competitive plans available with other lenders.
Why Independent Advice Always Wins the Day
This was one of the reasons why in 2013, I left Aviva and decided my future lay in the Independent Equity Release world, where I have access to the whole of the marketplace & I can therefore source plans tailored for the client, rather than the other way around.
Since becoming an independent adviser with Equity Release Supermarket, I have witnessed first-hand, instances where customers who are channelled into advice from one just lender, might have been better receiving independent advice. Granted this may have incurred an advice fee, however the longer-term savings & suitability of the plan was much better for the client.
Equity Release Case Study 1- Alan & Mary
Alan & Mary, both aged 65, had a £40,000 Santander interest only mortgage which reached it repayment date, however they didn’t have anything in place to repay the capital. Their property was worth £300,000 and they eventually plan to sell their home in 10 years to buy a bungalow near their daughter, with a plan to repay the equity release plan off early. They were close to proposing for a Legal & General lifetime mortgage but had reservations about variable early repayment charges, which could see them being charged a penalty of up to 25% of the loan amount, dependent on the changes of long term market interest rates.
They decided to look online and found ourselves at EquityReleaseSupermarket.com and contacted myself for some impartial advice. Once I had obtained all the details required, I then researched the whole of the market and recommended a plan from LV= which had fixed early repayment charges for just 10 years, and, crucially, no penalties after 10 years. The plan also allowed them to make flexible voluntary payments to service the interest, which, admittedly, is a feature also offered by Legal & General.
We also considered a plan offered by Hodge Lifetime which had a downsizing protection option after 5 years, meaning that no penalty would be charged upon selling their home and repaying the loan after 5 years. They felt comfortable with the plan from LV= due to the known fixed early repayment charge and fitted in with their future plans.
Equity Release Case Study 2 - John
John, 66, lives in a flat in London worth £350,000. Santander referred him to their advisory service which would only recommend Legal & General plans. He needed to raise £95,000 to pay off a mortgage but also wanted access to further funds for home improvements and a new car. The maximum loan offered by Legal & General was only £110,075, which was enough to clear his mortgage but wasn’t enough for his other objectives.
He decided to check online using the handy comparison tables kindly provided by comparequityrelease.com. looked at the whole of the market, and was pleasantly surprised to find that he could release up to £133,000 with another lender, Retirement Advantage, which was perfect to repay his mortgage, update his property and buy a new car. This appealed to John, and he also liked the fact that there are no early repayment charges after just 8 years this time.
Some of the Flexible Features Available on Equity Release Schemes in 2017
The following are features from a range of equity release schemes which are available from speaking to an independent adviser such as myself, who can look at the whole of the market, rather than just one lender:
- Enhanced terms due to ill health – this can provide an increased lump sum, or a lower interest rate, dependent upon the level of impairment
- Downsizing Protection options after 5 years – this option enables a move to another property, with the option of paying off the scheme in full, with NO penalty
- Make voluntary payments by standing order – make regular repayments to suit budget & provide balance control
- Fixed early repayment charges for just 8 years – ability to be early repayment charge free after 8 years
- More flexibility for retirement properties – plans suitable to meet retirement development construction
- Buy-to-let and holiday home lifetime mortgages – we have access to equity release schemes where ownership is not just on the main residence
- More favourable lending with properties that have large flat roofs – using the whole of the equity release market we can assess lenders specific underwriting criteria
- Lending available for ex-local authority flats – where many providers choose not to lend, some equity release companies have different underwriting rules we can access
- Ability to make voluntary payments of up to 15% - should quicker repayment, or management of the loan amount be required, certain lenders will accommodate
- Availability of interest only retirement mortgages – when switching from residential to lifetime mortgage, many deals are available to facilitate monthly repayments into retirement
As an independent equity release adviser, I always recommend getting whole of market advice from a broker like Equity Release Supermarket who is regulated by the Financial Conduct Authority & members of the Equity Release Council.
For further details on the range of equity release mortgages available, please contact Mark Rumney on 07957 974826 / 01246 418442, or email me - [email protected], or you can find me online at https://www.equityreleasesupermarket.com where my personal website BIO page can be read here.