lifetime mortgage insight | issue 2 | april 2015

In the last 12 months funding lines wobbled at the decision of

2014 budget, but in hindsight it has given the industry a wake

up call and the chance for a major rethink. It has reworked

lending criteria to fit more in line with traditional mortgages,

taking away the stigma of equity release and made it attrac-

tive to new borrowers, wanting just a lifetime mortgage to

meet everyday needs.

What we have seen in the last 12months:• Returning of the fixed rate redemption penalties

• Early repayment exceptions for joint to single if change in

circumstances

• Interest payment s other than direct debits

• Payments can be made the old fashion way that our bor-

rowers over 55 remember, standing order, cheques and the

modern BACS!

• 10% rule brought in from the conventional mortgage mar-

ket

• Enhanced and medical lifestyle products to accommodate

larger LTVs

• Fee free style re-mortgage packages to assist clients with

no savings

• Increase in LTVs of up to 3% backed by low a rates

• Choice of a reserve limit with no further underwriting

Common sense has prevailed, the industry has listened to

the needs of the borrowers.

Equity Release is the NEW LIFE

LINE... Pension pot or not!

A big thank you to all our lenders.

LIFETIME MORTGAGEINSIGHT

Issue n. 2| April 2015

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

Lending rules and economic pressure push home owners to equity release By Faye Moutzouri, The Equity Release Council Page.5

Equity Release: better for clients, better for businessBy Neil Uttley, Aviva

Page. 2

The Premier Equity Release Club gets ready for exciting times ahead…By Jane Hanlon

Now, the big pension pot cash bonanza... How will it go? A rush to invest or spend, spend, spend? How will Equity Release/Lifetime Mortgages fair?

A new lifeline

Jane Hanlon & Lyn PerrettThe Premier Equity Release Club

15 year gilt rates15 year gilt rate at 06/04/15 = 1.96%

15 year gilt rate at 13/04/15 = 1.98%

Gilt rates supplied by Just Retirement

2 Lifetime Mortgage Insight - Issue 2 - April 2015

Equity Release: better for clients, better for businessBy Neil Uttley, Retirement Solutions Manager , Aviva

Once associated with negative equity and repossessions, equity release is no longer the black sheep of the retire-ment portfolio. In fact, it’s forming a key part of many people’s retirement plans.

With a whole host of new features in

Aviva’s suite of equity release prod-

ucts, we’ve removed many of the old

barriers to purchase, making equity

release a valuable addition to any ad-

viser’s retirement product toolkit.

Meet new improved equity release. With equity release from Aviva, cli-

ents no longer have to worry about

losing their homes. In fact, they can

stay until they die or go into long term

residential care and even move in the

meantime. They can also draw down

money without losing sleep over inter-

est building up on funds they haven’t

accessed yet. And should they want to

leave something behind for children,

that’s not a problem either - they can

choose to safeguard a proportion

of their home’s value.

All of which should make equity re-

lease a much easier sell to those cus-

tomers who can genuinely benefit

from it.

An answer to the question of

longevity? Here’s another reason equity re-

lease’s time has come: increased life

expectancy is putting a huge strain on

thousands of pension pots. Coupled

with new pension rules allowing easier

access than ever to retirement funds,

running out of money could be a stark

reality for many retirees – making eq-

uity release a timely solution for cash-

strapped pensioners.

A product that’s welcomed by older clients Research from Aviva supports this,

showing older clients are open to us-

ing the equity in their home as a form

of income, with 16% of over 65s say-

ing they would consider it compared

to 12% of 55-64s. With failing health

a real concern too, 26% of those sur-

veyed said they would consider equity

release to fund long term care.

A timely boost for businessAll of these changes mean there’s

rarely been a better time for clients

to consider equity release as part

of their retirement plans. Especial-

ly when you consider many baby boomers now reaching retirement

age are asset rich but cash poor. With

equity release they can have cash to

spend as they please on everything

from home-improvements to helping

out family.

So all things considered, perhaps it’s

time for you and your clients to bring

equity release back into the fold once

again? Find out more at aviva-for-ad-

visers.co.uk

Contact AvivaTel: 0845 300 2837

Visit: www.aviva-for-advisers.co.uk

*Research based on 1,200 homeowners aged over 55 in an online poll conducted by ICM Research for Aviva in June 2014

3Brought to you by The Premier Equity Release Club

New beginnings: an era of flexible retirement lendingBy Dave Harris, Managing Director, more 2 life

With all the talk of increased flexibility in retirement income planning, it won’t be long before the focus shifts towards the retirement lending market.

Although massive strides have been made towards better

customer choice and value, it’s unclear if the lifetime

mortgage market is actually delivering the best of what it

has to offer.

Unfortunately industry reporting at product level is sadly

lacking, which makes it difficult to gain a full picture of what

is going on. As one of the largest providers of enhanced life-

time mortgages, more 2 life believes that perhaps as little

as a quarter of the market is written on an enhanced ba-

sis. Bearing in mind that, according to specialists in the en-

hanced annuity market – like MGM, Partnership and Just

Retirement – around 60-70% of customers are thought to

qualify for an enhanced due to a medical impairment, this

figure should be setting our alarm bells ringing.

Admittedly we’re talking about two very different markets;

where one is trying to secure as large an income as possible

and the other is trying to secure as large a loan as possible.

An enhanced lifetime mortgage merely gives the client ac-

cess to a larger borrowing facility, and many cus-

tomers will simply not want or need this… yet.

The trouble with closing the client off to a larger borrowing

facility is that they will never again have access to that mon-

ey, even if they need it in the future. Combining a larger fa-

cility with a flexible drawdown option means your client can

withdraw what they need, when they need it. Or they may

not withdraw any at all. The choice will ultimately be theirs,

playing nicely into the idea of flexibility and giving power to

the pensioner. (And by the way, let’s not forget that their

withdrawals are tax-free.)

The difference it can make is substantial. A healthy 65-year

old currently receives a standard LTV of around 25%. If

they had a mild to moderate health impairment, this could

rise to 30%, while someone with a severe impairment could

receive an LTV of up to 45% or even higher. For a custom-

er with a property worth £250,000, this is the difference

between a loan of £62,500 on standard terms, £75,000 on

moderate terms, and £112,500 on severe terms.

Combining the maximum loan possible, with a drawdown

facility that never runs out, gives customers a lot more

flexibility. And the beauty of the flexible drawdown

option means that customers are not forced to take the

money if they don’t need it, but they know they can easily

access it if they do.

Contact more2lifeTel: 08454 150 150

Email: [email protected]

Visit: www.more2life.co.uk

Source: www.financialreporter.co.uk/retirement/up-to-70-of-retirees-missing-out-on-enhanced-annuities-says-mgm-advantage.html

www.pensions-pmi.org.uk/about-us/pmi-expert-partners/post-retirement-income/


Why innovation in the lifetime mortgage

market is key to its growthBy Alice Watson, Stonehaven

Last month we launched fixed early repayment charges (ERCs) across our entire range. The new ERCs, which are in place for the first eight years of the mortgage, were introduced after receiving feedback from advisers and customers who wanted greater simplicity and certainty. Crucially, the new ERCs are also designed to encourage growth in the market.

2014 was a record breaking year for

the industry, with lending reaching al-

most £1.4bn, and we believe innova-

tion in the sector is key to helping such

growth; especially when the needs of

customers are evolving.

In 2008 Stonehaven launched inter-

est paying lifetime mortgages to the

sector, and since then the market has

seen the introduction of a broader

range of flexible products

where customers can choose to pay

all of the interest and some of the cap-

ital, too.

Our fixed ERCs, which are available

on these interest paying products,

have helped bring the sector one step

closer to the mainstream.

These innovations are making lifetime

mortgages more compelling for a new

audience. We’ve seen an increase in

the number of customers using the

cash they release from their home to

clear a mainstream mortgage.

Over the last 6 months 36% of Stone-

haven customers have used some, or

all, of their cash for this reason. We’re

expecting this to be a growing trend

following the FCA’s 2013 Thematic

Review which discovered there were

2.6 million interest-only mortgages

due for repayment by 2041. As many

as 48% of these homeowners faced a

shortfall at repayment day of an aver-

age around £71,000 and as many as

260,000 had no repayment vehicle of

any kind in place.

Alongside homeowners carrying re-

sidual mortgage debt into retirement,

1 in 5 Stonehaven customers have

used some of the

cash they release

to help purchase a

property.

Again,

innovations in

the market which have aligned life-

time mortgages more closely with

mainstream mortgages make this op-

tion more appealing to older borrow-

ers, and we’re expecting to see these

figures increase in 2015.

Whilst the future can’t be predicted,

the pension freedoms bring

another change to the retirement

landscape, and we can expect them

to influence

the reasons why customers are taking

out lifetime mortgages.

Innovation in the market has helped

financial advisers tailor products to

suit their customer’s needs, and is

key to encouraging further growth in

2015.

Contact StonehavenTel: 0800 068 0212


Visit: www.stonehaven-uk.com


Lending rules and economic pressure push home owners to equity release By Faye Moutzouri, The Equity Release Council

Economic pressure and pension reforms have increased

opportunities for equity release products, creating more

demand and opening the way for more market players and

more flexible products addressing various needs. In the

second half of 2014 our sector saw a

record-breaking growth with younger borrow-

ers turning to lifetime mortgages, following the Mortgage

Market Review (MMR) and the 2014 Budget pension an-

nouncement, based on data from the Spring 2015 edition

of the Equity Release Market Report.

Prior to these rules, the share of customers aged 55-64

had been in decline. Specifically, the in-depth report from

the Equity Release Council shows that the ratio of new eq-

uity release customers aged 55-64 dropped from 24% in

2011 to 21% in 2013 and just 17% entered new schemes

in H1 2014. Indeed, the 3% jump of this age group from

quarter to quarter (H1 2014 to H2) to make up 20% of new

equity release customers in the second half of the year is

very impressive!

Firmer lending rules and pension reforms seem to

be creating obstacles for homeowners looking to access

residential mortgage finance later in life particularly if the

desired term may stretch beyond their normal retirement

age. Additionally, some younger borrowers may also have

used equity release in H2 2014 as a resource for immediate

finance, instead of accessing their pension savings ahead of

6th April 2015.

Graph 1: Growth of equity release customer numbers by age group

Looking more closely at customers’ preferences to the dif-

ferent types of product, we note that drawdown lifetime

mortgages are steadily the most popular type with two-

thirds (66%) of new customers selecting a drawdown prod-

uct in 2014, compared to 34% and <1% for lump sums and

home reversion plans respectively.

Along these lines, there is a comparison where it is clear

that the market is able to lift peoples’ retirement finances

as opposed to their pensions’ savings. A typical first instal-

ment of £46,356 (during 2014) far exceeds the average

single defined contribution (DC) pension pot of £25,000.¹

Economic pressure is hitting the elderly severely as

the recent Equity Release survey across the UK

has also highlighted. In fact, one of the stark findings is that

money shortfalls mean one in ten older homeowners miss

a meal every week across the country. More demand is and

will continue to be generated for equity release as a solu-

tion that can fund later life.

The future of the equity release market looks more prom-

ising than ever and with that comes more innovation, more

choice for consumers and more opportunity for profes-

sionals to help those people unlock the wealth tied up in

their homes.

Graph 2: How the typical amounts of equity released compare to average pension pots

Contact The Equity Release CouncilTel: 07557 856 705


Visit: www.equityreleasecouncil.com

1Source: The Pensions Regulator, 2013/14

http://www.equityreleasecouncil.com/document-library/market-report-spring-2015/

http://www.equityreleasecouncil.com/news/money-shortfalls-mean-one-in-ten-older-homeowners-miss-a-meal/


Rate changes from 1st January 2015Lender Date

changeProduct Beginning of year Current rate Rate change

Aviva 26/1/2015 Flexi Lowest at 5.56% 5.16% 0.4%

Using tool 7.39% 5.21% 2.18%

Please note with Aviva each case is individually assessed on the pricing tool – 0800 612 5423

Hodge 9/2/15 Retirement 4.75% 4.39% 0.36%

Lifetime Flex 6.39% 6.19% 0.2%

Lump 6.35% 5.99% 0.46%

Just Retirement 9/2/15 Roll up 6.39% 5.59% 0.8%

Max lump 6.75% 5.99% 0.76%

Enhanced 6.85% 6.39% 0.46%

Just Retirement 18th March offer PRICE MATCH on Loans over £20,000 for 60-74 PLUS £500 CASH BACK

LV= 10/2/2015 Flexible 6.44% 6.24% 0.2%

Lumps Sum 6.19% 5.99% 0.2%

More2life 21/1/15 Enhanced 7.22% 6.43% 0.79%

Protected 6.70% 6.17% 0.53%

Feb 2015 Protected 6.17% 5.69% 0.48%

8/1/2015 Interest 6.25% 5.75% 0.5%

Newlife 17/2/2015 Flexible 6.43% 5.05% 1.37%

Flexible Plus 6.43% 5.25% 1.18%

Lump 7.39% 5.75% 1.64%

Partnership 16/2/15 Lump 7.75% 6.95% 0.8%

18/2/15 Lump 6.95% 6.35% 0.6% = 1.4%

Pure Feb 2015 Draw Down 7.22% 6.79% 0.43%

12/2/2015 Draw Down 6.79% 6.39% 0.4% = .83%

Feb 2015 Lump Sum 1- fees package

6.95% 6.21% 0.74%

Feb 2015 Lump 6.75% 5.99% 0.03%= .96%

Stonehaven Jan 15 Interest 6.1% 5.6% 0.5%

Interest 6.2% 5.7% 0.5%

Interest 7.39% 6.49% 0.9%

Stonehaven 16th March switch from gilts to % ERCs Year 1-5 = 5% year 6-8 = 3% year 9 + = nil.Stonehaven 16th March offer reserves on all of range with rate loading of 0.2%


Reputation is everythingBy Les Pick, National Sales Manager, The Right Equity Release

I have commented on the ever growing popularity of Equity Release products in recent months, even dared to hope that they have turned the corner to becoming mainstream but could there be a problem?

Equity Release figures have been

driven by “need” in recent years. The

economy, MMR restrictions and rising

levels of debt have created the perfect

storm. Interest rates have dropped to

unprecedented lows and providers

continue to improve flexibility that will

appeal to those who are caught in the

interest only time bomb but there is a

problem, reputation.

As advisers we see the real difference

that Equity Release can make to peo-

ple’s lives. We see the improvement in

lifestyle that it gives to those who use

it, sometimes transforming their lives

by relieving stress and worries.

Ask the average retiree in the street

what they understand about

equity release and they will

still say that they would not touch it.

They will say that you are likely to lose

your home, that you have to sell your

home to the provider, that your ben-

eficiaries will not inherit anything and

that you might be thrown out of your

house when something goes wrong.

Really? All of these things can be

avoided and guaranteed against with

a modern, regulated equity release

scheme. So how is it that the public

still believes these facts to be true

when so much has changed since the

80s/90s?

Since the beginning of the millennium

the way we learn has changed due

to the information available on the

internet and in the media. Apple

have become a phenomenon, Face-

book has transformed how we stay in

touch, the internet has become some-

thing we could never have imagined

20 years ago and something called

Google has transformed lives in al-

most every country in the world but

still Equity Release struggles with it’s

reputation. I wonder how this can be,

given all the information available?

As an industry we must continue to do

all that we can to maintain high advice standards, we must

continue to produce excellent prod-

ucts and to ensure that the consumer

is treated fairly.

It is a travesty that so many people

will not enjoy their hard earned retire-

ment to the best of their ability due to

lack of information and a poor reputa-

tion in an era that could not be better

placed to avoid such issues.

Contact Les Pick, TRERTel: 07966 399 805


Visit: www.therightequityrelease.co.uk


Top tips from Brigewater Equity Release Limited’s Chris Prior

Contact James Young, Hodge LifetimeTel: 07977 562 422


Visit: www.hodgelifetime.com

• Become a member of the Equity Release Council; if you’re

not a member already of course.

• Increase your knowledge in the later life area.

• Start or finish off your 2015 business plan.

• Put a plan in place to secure introducer relationships or

add even more (remembering that you should target one

case a year, per introducer).

• Attend as many equity release events as possible –

continuous knowledge is vital.

• Attend networking events/meetings within your local

area.

• Understand all the products available in the market, in-

cluding home reversion plans.

• Revisit your fee structure; when discussing this with equi-

ty release specialist advisers it appears that the average fee

charged is approximately £1,000.

• Work to increase the number of referrals you receive

from your client bank and new customers. If you don’t ask,

you don’t get

• Work smart. In this business time management is crucial –

could someone else be doing your administration work?

Contact BridgewaterTel: 0800 032 2118


Visit: www.bridgewaterequityrelease.co.uk

Hodge Lifetime welfare benefit guide 2015-2016 now available

When assessing your customer’s requirements for borrowing

in retirement, it is important to check whether any

benefits will be affected by your recommendation.

Hodge Lifetime have produced the welfare benefit guide in

association with Ferret Information Systems Ltd to give an

overview of the benefits available to your customers aged 60

and over.

The guide is designed as a ready reckoner, for a fuller assessment of your customer’s circumstances consider

using one of the software options available via Ferret amongst

others.

Download a copy today by visiting our website

www.HodgeLifetime.com/downloads.asp or call the Hodge Lifetime Customer Services Team on

0800 731 4076.


The inaugural Great Retirement Money

DebateUpcoming event hosted by The Equity Release Coucil

The Equity Release Council will be hosting the inaugu-

ral Great Retirement Money Debate on Tuesday 19th May 2015 and our readers are invited to attend.

The debate will take the same format as BBC Question

Time, with Paul Lewis taking on the role of David Dimbleby

and accompanied by a panel of at-retirement specialists.

Discussions will examine the key issues that will shape the

future of paying for retirement in the UK following the ar-

rival of the new pension freedoms, product development

and changing consumer demand, the role of advice and

paying for care.

The event begins at 2:30pm in Central London

and will include refreshments and networking time. For

those unable to make it on the day, the entire debate will

also be live streamed.

For more details, or if you would like to attend or watch the

live stream, please register your interest here.

The panel is made up of:

o Nigel Waterson, Chairman of the Equity Release Council

o Baroness Greengross, Chief Executive of ILC-UK, Pres-

ident of the Pensions Policy Institute

o David Thomas, President of the Personal Finance

Society

o Jane Vass, Head of Public Policy at Age UK

o Paul Johnson, Director at the Institute for Fiscal Studies

For more details or to register:Visit: http://goo.gl/spKrFQ

Tel: 020 7427 1400


https://docs.google.com/forms/d/1ykoBgwSi2z2dkYeBE5GkOXpfn59DtuT7vrwQDxETXQU/viewform

A day in the Life of Steven Bromley - Pure Retirement Underwriter

Who do you work for and how long have you been un-derwriting?

I am the property underwriter at Pure Retirement based

in Leeds. I have been involved with Pure since it began in

2013. Before then I spent four years working in the Buy to

Let Team at Barclays Bank.

What does your typical day look like and what are your key responsibilities?

8.30a.m –Run the daily reports and set the GILT rates for

the day.

9.00a.m – Begin working the day’s valuations. This,

for most people, is the most crucial part of the process as it

will be the valuation that determines if we proceed on the

requested amount.

11.00a.m – Set up and request the funds for completion,

ensuring all documentation has been met and satisfied.

Afternoon – Work through the day’s applications carrying

out initial property checks and credit checks.

The Premier Equity Release ClubS h a r i n g w i t h y o u t h e r i g h t w a y t o d o E q u i t y R e l e a s e

www.thepremierequityreleaseclub.co.ukhelpdesk@thepremierequityreleaseclub.co.uk

0800 612 5423

Work through the email inbox answering broker queries,

replying to Brokers regarding existing cases. Answering

queries sent from our solicitors.

At Pure Retirement we are constantly trying to evolve and

improve, so each week, we as underwriters look at different

areas on where we can make things easier for our Brokers.

What is your favourite part of your job?

Approving a case! I think for anybody involved in Mort-

gages it’s great to know you are helping people with

what is essentially one of the biggest decisions they will

ever make. The feedback from Brokers regarding the quali-

ty of service is something I am proud of.

The Great MYTH!

Contrary to popular belief underwriters do not want to

decline cases, if that was the case we wouldn’t have a busi-

ness. We do our upmost to judge each property on its own

merit and whilst it would be nice to approve every case we

have a responsibility to not put the future saleability at risk.

What attributes and personality must one have to be an underwriter?

Flexible, meticulous and accurate. Change is con-stant in the mortgage industry. As new products and

guidelines come through, an underwriter needs to be

adaptable and positive, keeping up to date with the compa-

ny and the market changes. Products and policy that were

allowed three years ago may not be allowed in today’s mar-

ket. For me it’s a challenging but fulfilling career.

To survive being an underwriter you need to be fun, witty

and full of laughter and if this person exists then please let

me know!

Contact Pure RetirementTel: 0844 854 2120


Visit: www.pureretirement.co.uk/professionals

lifetime mortgage insight | issue 2 | april 2015

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