Some lenders already offered this flexibility, but the new product safeguard would soon be available as a standard design feature in all loans that meet the council’s standards.
New customers could not only reduce their borrowing, but offset the interest, without signing up for further repayments.
The ERC also confirmed initiatives it planned for 2022, including establishing a technology forum and a legal competency framework to aid practitioners.
David Burrowes, chairman of the ERC, said: “Updating our standards to lock down the ability to make partial repayments on lifetime mortgages – an innovative feature that has become increasingly common in recent years – provides flexibility for consumers and ensures the sector continues to evolve to meet changing demographic needs.
“As recent years have reminded us, people’s circumstances can change and customers who find they can use earnings, savings or an inheritance to reduce their borrowing in later life will be able to do so without incurring early repayment charges.”
Sector returns to growth
Since 1991, the council said, more than 592,000 new equity release plans backed by its standards had helped homeowners aged 55 and over to borrow £38.7bn against the value of their property. The sector returned to growth last year for the first time in three years with more than 76,000 new and returning customers, the council said.
The timing dovetails with a report, supported by Standard Life Home Finance, that explores the sector’s development over three decades as well as future priorities.
Some of the bold-face names in the report include Sir Hector Sants, chair of the governmental Money and Pensions Service; the MP John Glen who is economic secretary to the Treasury; Clive Betts MP, chair of the House of Commons Levelling Up, Housing and Communities Committee; and Baroness Sally Greengross, chief executive of the International Longevity Centre – UK and president of the Pensions Policy Institute.
Kay Westgarth, head of sales at Standard Life Home Finance, said while the firm was a relatively new entrant to the equity-release market, “we are building on the great work that the industry has done to raise standards, educate consumers and ensure it is possible for over-55s to safely access their housing equity. As an industry, we have come a long way in a relatively short period of time but there is always room for improvement.”
Aiding individual circumstances
The council’s update, Westgarth said, “will allow customers to better manage their borrowing and ensure that products work for their individual circumstances. It is this type of innovation that will ensure we see another 30 years of growth and change for this vibrant market.”
Stuart Wilson, corporate marketing director at More 2 Life, said the repayment announcement was great news for both customers and advisers.
“The ability to make penalty-free ad hoc repayments will allow people to better manage their borrowing and potentially help to open up the market to a new range of customers – especially when used in conjunction with interest repayments,” he said.
