The monthly interest rate cuts apply to it its Interest Select Life plans, which have fallen from 5.94% to 5.46%; Interest Select plans from 6.03% to 5.56%; Interest Select Plus plans which have been cut from 6.08% to 5.60% and Interest Select Max plans from 6.78% to 6.30%.
The Interest Select range allows borrowers to pay some or all of the interest charged each month giving them the choice to reduce or wipe out the impact of rolling up the interest and adding it to the mortgage balance.
The reduction in rates could mean that for a borrower choosing to pay 100% of the interest and taking out a £50,000 loan on the Interest Select Life plan the customer would pay £230 a month instead of £251. Over a 20-year term this adds up to a saving of £4,862.
Tom Evans, managing director, Stonehaven, said: “Stonehaven has secured a substantial tranche of new funding for this product but being so attractive it will have a definitive life span.
“This unprecedented cut will cement our number one position in this market. As we enter 2015 this move signals our clear intentions for the year ahead to support advisers who are looking for flexible and market-leading products for their clients.”
Simon Chalk, technical manager, Equity Release for Age Partnership, described the cuts as ‘unusually deep’.
“Because these plans are lifetime mortgages it means that a 55-year-old can secure record low fixed rates on an interest-only loan for an indeterminable number of years,” said Chalk.
“Since the implementation of the Mortgage Market Review, sales of interest-only lifetime mortgages have lost ground to the more flexible rolled-up interest plans from several providers incorporating voluntary repayment options.
“Stonehaven correctly responded to the competition in launching their own such plan, the ‘voluntary select option’ recently and this latest cut to their flagship product should help sales hold up well.”
Stonehaven’s rate cuts come ahead of the expected increase in demand for equity release products in April when pensioners begin receiving free pension advice as part of the government’s package of pension reforms.
Chairman of the Equity Release Council Nigel Waterson said the freedoms pensioners will be afforded, to spend their retirement pots as they see fit, will see more homeowners consider their housing wealth.
“Long-term house price growth has left many older homeowners sitting on a personal property fund that can transform their financial outlook in later life. Equity release should be considered across the board as one of a variety of options on the table, so people make the right decisions and use all their available assets to secure the most comfortable retirement possible,” he said.
