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Age pledges to switch equity release borrowers from high cost loans

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  • 19/04/2021
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Age pledges to switch equity release borrowers from high cost loans
Age Partnership has called for equity release borrowers who are trapped on high interest rate lifetime mortgages to contact the brokerage to find out if it can remortgage them to save money.

The broker wants lifetime mortgage borrowers to get in touch even if they did not take out their original equity release loan through Age as long as they have had their loan for at least 12 months.

Steve Auckland, chief executive of Age Partnership, told the Mail on Sunday the equity release industry has in the past had a “tarnished reputation”.

He added: “People felt they were being ripped off, some of the earlier products were really inflexible and the loans had high interest rates.”

High interest rates are those considered to be six per cent or more.

In February, Moneyfacts’ analysis found that the average equity release interest rate was 3.95 per cent, the lowest it has been since Moneyfacts began recording rates. The number of deals available to borrowers was also at an all time high with 488 loans on offer.

Steve Baker, Conservative MP for Wycombe and Treasury Select Committee member, told the paper: “This is a welcome step that could bring peace of mind to many elderly individuals who have found themselves, through no fault of their own, as equity release mortgage prisoners in this ultra-low interest rate environment.”

The main barrier to switching equity release deals are the punitive early repayment charges. If a borrower has taken out an equity release mortgage which has a gilt-linked early repayment charge they can pay as much as 25 per cent of their original loan in penalties to be free of the deal.

More modern lifetime mortgages come with a penalty that reduces over time like a mainstream mortgage, for example, in year one, the borrower would have a 10 per cent penalty and year ten they would pay a one per cent penalty.

The early repayment charge and Age Partnership’s fee would be factored into the cost of switching and only if there is saving after fees have been applied would the deal take place.

No fee is charged if the switch does not proceed.

 

 

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