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The L&G hybrid lifetime mortgage addresses ‘pain points’ in the market – Brown

  • 21/11/2023
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The L&G hybrid lifetime mortgage addresses ‘pain points’ in the market – Brown
The payment term lifetime mortgage (PTLM) from Legal and General (L&G) Home Finance that was launched this week is expected to address some of the challenges in the later life lending market.

The product was created to fill a gap in the market, the provider said, and has a lower starting borrower age of 50 as well as a higher loan to value (LTV) limit of 55 per cent. 

Speaking to Mortgage Solutions, Craig Brown, CEO of L&G Home Finance, said it was the right time to launch the option. 

“It’s taken a little time just to work through the product construct and engage with the regulator. In terms of the optionality, it gives advisers and customers – particularly where the interest rates and LTVs have been challenging in the later life market – another alternative,” he added. 

Brown said because there was a rolled-up interest aspect to the product, it required the advice and understanding of a qualified later life lending adviser. 

He said the product “certainly” bridged the gap between a standard and retirement interest-only (RIO) mortgage, adding that mainstream mortgage intermediaries should be aware of the product. Brown said the product addressed a “pain point” in the market which stopped borrowers from being able to pass affordability tests or access higher LTVs, especially if they did not have a robust repayment strategy at the end of their current term. 


Broadening choice 

Brown said it was a “great” option which helped further the conversation around later life lending, especially concerning interest-only borrowers. 

He also said advisers would benefit from offering customers more choice. This would be done by encouraging advisers to go outside of the products they usually recommend, Brown said. 

“It’s really important that the adviser has an awareness of the various products available and either having the expertise to advise on them or build partnerships with specialists,” he said. “It’s a unique product that we’re really pleased to have developed and bring to market.”

When asked if this could change the perception that it was only homeowners of a certain age that were able to access equity from their homes, Brown said L&G researched gaps in the market and found that many homeowners under the age of 55 were already seeking later life lending options. 

“We saw some of the search data and some of the enquiries we were getting were from customers of a slightly younger demographic, it’s just the products didn’t exist. I think the real benefit of this product is it’ll get customers who can service the interest contractually and allow them to access a higher LTV,” he added. 

He said L&G’s starting point before creating the product was looking at customers who failed on the affordability with a RIO due to post-retirement income and the death stress test. He said the RIO was still a “great option” but the dependence on a provable pre- and post-retirement income made it restrictive.

Brown said the PTLM would help people who had less certain post-retirement earnings or had a defined contribution pension rather than a defined benefit one. 

“What’s really brought it to life for me is the difference between the maximum LTV on our current lifetime mortgage range which is 17.2 per cent and this which is 55 per cent. 

“The difference is marked in what this product can offer customers access to, which is important following the mini Budget where current LTVs may not allow them to settle existing debt,” he added. 

When asked how the product might impact a person’s ability to access housing wealth later in life through more borrowing, Brown said the ability to service the interest with the option to continue doing this during retirement meant the original loan amount did not rise. 


Inspiring innovation 

There have been many conversations in the later life sector about the need for “hybrid” products which merge the aspects of a traditional and lifetime mortgage. 

Brown said speaking to colleagues in the sector and the Equity Release Council, there seemed to be “genuine support” for such options. He hoped other lenders would follow suit and bring in more innovative products, adding that it was “better for the industry”. 

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