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Interest-only mortgage customers ‘desperately need’ equity release innovation – More 2 Life

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  • 15/01/2018
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Interest-only mortgage customers ‘desperately need’ equity release innovation – More 2 Life
Interest-only mortgage borrowers are crying out for new equity release products to help them pay off outstanding capital debt, according to Stuart Wilson, channel marketing director at More 2 Life.

 

Only around half of interest-only customers can use traditional equity release because their loan to value (LTV) is too high at over 55% LTV, Wilson said.

A hybrid plan that, for example, combines a roll-up lifetime mortgage with an interest-only top-up – could help borrowers struggling to pay back debts at the end of the term, according to the More 2 Life director.

Wilson told Mortgage Solutions: “It’s a product innovation this market desperately needs – there are lots and lots of customers who need to repay that debt.”

He added: “The problem is only getting worse – lots of banks and building societies have been kicking this issue into the long grass.

“They’ve been allowing customers to extend their mortgage term and carry on paying the interest.

“But at some point, they’re going to want that debt repaid, they’re going to want to move that client on – and equity release is one solution.

“The difficulty is – these clients might have a LTV of 65% whereas equity release starts at 55% LTV; we need products that can extend lending to those types of clients.

“That innovation will have to come because the consumer demand is just growing and growing.”

It comes after Key Retirement last week warned the regulator could soon force action on interest-only mortgage customers who are now in limbo.

More lending records to be broken

Wilson hopes the market will see new products this year but, in any case, expects new funding to come into equity release in 2018, as well as new lenders.

It comes after equity release lending hit a record £3bn last year – but the sum is just a “drop in the ocean” of the market’s potential, considering over-55s have more than £3trn of property wealth, Wilson said.

After Nationwide last year dipped its toe into the market, more high street names are expected to follow in the coming months.

And should be one the radar of more intermediaries, according to Wilson.

He said: “It’s ever more important advisers talk to clients about equity release as an option – and do it as early as possible…

“For lots of people as they reach the point of retirement, their house is almost certainly going to be the biggest single asset they own, and if they are going to fund the retirement they want – and their care needs – equity release should be high on agenda for discussion.”

Advisers also have a role to play in helping consumers to understand the benefits of being honest about health conditions in relation to equity release and advising on enhanced products, Wilson said.

Many consumers hide issues such as blood pressure or diabetes because they think it could put them at a disadvantage.

Wilson said this hinges on asking the “right questions” and helping clients to realise health conditions could mean they, in fact, qualify for higher borrowing.

The market now needs more specialist advisers and More 2 Life is trying to encourage more people to move into the area or help to expand businesses to cover equity release.

Wilson added: “There is no better market to be working in right now – it’s such a vibrant and exciting space.”

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