TSB reduces resi rates
Effective from 20 September, TSB has made reductions across its residential range.
These include cuts of up to 0.20 per cent on selected two-year, three-year and five-year fixed purchase rates.
Reductions of up to 0.10 per cent have also been made on two-year and three-year fixed deals up to 60 per cent loan to value (LTV) and five-year fixes up to 90 per cent LTV for remortgaging.
TSB head of mortgages Nick Smith said: “We’ve made a number of changes to our residential mortgage range with the sole purpose of helping more people borrow well.
“The changes should go some way to offering peace of mind to those looking to fix their monthly payments for two to five years.”
Responsible Lending
Responsible Lending has released a fixed rate lifetime mortgage with what it claims to be the UK’s “lowest ever” interest rate.
Available through Responsible Life’s Retirement Mortgage Service, the mortgage has a 2.74 per cent monthly interest rate (MER) and 2.82 per cent APR.
The new product has a rate lower than Responsible Lending’s own previous rate of 2.98 per cent MER (3.02 per cent APR), which was released in August.
It is available with and without drawdown and on a sliding scale of loan to values (LTV) dependent on age.
For example, a customer aged 70 could access the rate with an LTV of up to 24 per cent and for joint applications the LTV is up to 23 per cent, with no upfront fee.
The minimum loan amount is £10,000 and the product has fixed and early repayment charges (ERC). Customers can repay up to 10 per cent of their loan each year without incurring an ERC.
Keith Haggart, managing director of Responsible Lending, said consumers could now benefit from an enormous range of products and the most competitive rates the industry has ever seen.
“We are extremely pleased to be able to beat our own market leading rate to set a new all-time low for the industry,” he added.
The trade body, which has been boosted by new entrants to the market, has signed up adviser Sarah Barlow of Sarah Barlow Financial Solutions Limited (SBFSL).
The milestone comes after providers reported their busiest quarter on record in the first three months of 2019, with £936m unlocked from people’s homes, according to ERC membership data.
“I’ve seen a greater consumer demand for equity release as homeowners use it for a variety of reasons, including giving a living inheritance to help children onto the property ladder,” Barlow said.
“It was therefore important to me to be a member of a reputable trade body. One which promotes high standards of conduct and practice and helps consumers gain confidence in sourcing the right professional adviser for their needs.”
David Burrowes, chairman of the ERC said equity release was moving into the mainstream of financial services.
“With the UK’s population living longer, attitudes towards property and financial planning are changing across the UK,” he said.
“The retirees of tomorrow increasingly plan to use money invested in property as a ‘nest egg’ for unexpected expenses or to help family members while they are still alive. The UK faces a complex challenge to balance the financial needs of old and young alike and property has an integral role to play.”
The trade body
The ERC constitutes 300 firms and 1,000 registered individuals from providers, regulated financial advisers, solicitors, surveyors and other professionals.
Membership for advisers costs £303 for sole traders or individuals.
Firms with two to nine advisers pay £276 per person, falling to £220 each for businesses with 10 to 24 and £193 if a company has more than 25.
Its board includes Burrowes, who is also a former Conservative MP and ERC chief executive Jim Boyd, as well as chief operating officer Donna Bathgate.
Nine members of the ERC are also voted onto the board every two years, with current representation from More 2 Life, Retirement Bridge, Pure Retirement, Hodge Lifetime, Just Group, Aviva, LV=, Age Partnership and Key Retirement Solutions.
Other big providers such as Legal & General and Canada Life are members but do not currently have a seat on the board.
Chair, Victoria Hartley, group editor at Mortgage Solutions, began by asking the assembled brokers about the growth of the equity release market which is expected to pass the £5bn mark this year. To what did brokers attribute this growth?
“Knowledge (of the product) has driven sales,” said one broker. “As long as the rate is right and the plans are right, people are prepared to take the risk. The flexibility of these plans, combined with the lower rate, has driven the market.”
The brokers agreed that increased media coverage of equity release, combined with word of mouth, had raised its profile, although one broker reported customers saying: “I don’t want equity release, I want a lifetime mortgage.”
There was laughter at this but it was a reminder that plenty of people still don’t know about equity release, even though it could suit their retirement needs. What could be done to make this area grow even more?
“We’ve got to get the FCA to stop saying it’s a product of last resort,” said one attendee, while another thought the political situation in the UK was already threatening to slow down growth.
“The demand for equity release has flattened this quarter,” said the broker. Asked why, said pessimist mentioned “the b word” (Brexit) before elaborating:
“In equity release, and the economy more generally, people are thinking: ‘We’re going to see what happens, watch and wait.’”
Another broker urged colleagues to try to reach customers who are off-line (more than half the 4.5 million adult Britons who have never used the internet are aged 75 or over):
“If there’s one thing we can do [to promote equity release], it’s to try and get the people who are not going online,” they said.
Community outreach events, where brokers meet in person with potential customers, were recommended, as was a recruitment drive, although some pointed out that elderly borrowers tend to prefer experienced advisers, especially as advising on equity release required specific expertise.
“With a mortgage, you ask the borrower how much they need and what’s their income and, based on that, you sort it out,” said a broker. “Whereas with a lifetime mortgage, there are many more factors that come into it.”
Technology can make advisers lives easier
Technology will be key to expanding equity release, as Chris Flowers, from the evening’s hosts Pure, pointed out: “I think what you will see is a huge play towards technology (that is) able to make advisers’ lives easier,” he said when asked about Pure’s plans.
Talk turned to Standard Life which had caused confusion earlier in the week with what emerged through various trade publications as a misleading publicity campaign to announce its collaboration with Age Partnership.
“Standard Life haven’t re-entered the equity release market,” Flowers explained, scotching inaccurate reports. “It’s [acting as] a lead generator.”
One broker summarised the Standard Life news as all agreed it was a positive for the market: “They are almost brokering, so they’re looking to introduce. It’s still good for the market because Standard Life is a big name and if it’s being connected with equity release, it’s kind of like ‘oh, everybody is doing it.’”
Single surveyor dominance ‘not good for the market’
Towards the end of the evening, brokers expressed concern about under-valuations and the increasing market dominance of surveyors e.surv in the market.
“It seems that e.surv are working with five out or nine lenders and that’s not good for the market,” said one broker.
“You get massive variances in valuations,” said another, alluding to disagreements between brokers and surveyors about the value of properties.
To illustrate, one broker talked about a client who challenged a surveyor’s valuation:
“I had a fair challenge, a good challenge for a flat near Notting Hill and the owner was right,” said the broker. “I thought: ‘If this doesn’t get overturned, nothing will.’ It didn’t get overturned.”
Another broker thought surveyors’ stubbornness about valuations was inevitable, saying: “You’re questioning (the surveyor’s) professional judgement so they’re always going to go like that.”
Flowers, meanwhile, thought surveyors could play an even more important role in equity release: “The biggest requirement for surveyors is in the equity release market,” he said. “We need to get away from (the idea that) it’s a valuation (that surveyors provide); it’s not a valuation, it’s a property assessment. Value is one of the elements that (surveyors) assess but it’s more, is this property acceptable to the lender set out in their criteria?”
The last word, however, concerned the importance of brokers: “Most of the property assessment is done by us,” said one attendee. “There are not many cases that I can think of that fall foul of property assessment.”
Attendees at Market in Brighton
Hannah Boxshall Equity Release Supermarket
Des O’Hara Access Equity Release
Matt Sutton Emerald
John Whyte The Right Equity Release
Danielle Dennis Mortgage Solutions
Oonagh Sheehan Mortgage Solutions
(Chair) Victoria Hartley Mortgage Solutions
Chris Flowers Pure Retirement
Inken Bushnell Pure Retirement
Jane Forshaw Pure Retirement
With huge thanks to all who joined us for such an enjoyable evening, particularly our hosts Pure Retirement.
This is not a re-entry to lending and Standard Life said it has no plans at this stage.
Age Partnership will be providing whole-of-market equity release advice along with guides and online calculator tools to support advisers when discussing equity release with clients.
Age Partnership’s advice will also be available to existing Standard Life customers.
Standard Life Bank entered the equity release market as a provider back in 2003 and left in 2008, with the onset of the financial crisis, before it was sold to Barclays Bank in 2009.
It noted that a decade later, equity release was growing in popularity as many over-55s try to unlock some of the value of their home to fund their retirement or help younger generations of their family get on the property ladder.
The Equity Release Council has reported that new customer activity almost doubled since the first half of 2016 and the lifetime mortgage market is expected to surpass £5bn this year.
Broad spectrum of needs
Susie Logan, brand and marketing director at Standard Life, said: “Since pension freedoms we are seeing so much diversity in the way people are accessing their life savings.
“By adding an equity release service, we are acknowledging that advised clients have an increasingly broad spectrum of financial planning needs.
“Equity release gives advisers another option for clients, offering them more flexibility and choice in how they spend their life savings, and, for many their property may be their biggest asset.”
Dan Baines, commercial director at Age Partnership, added: “There are more products on the market than ever before, providing homeowners with flexibility on how and when they choose to access their property equity.
“We look forward to helping advisers via Standard Life, for many years to come.”
Wing’s position as risk and compliance director, will see him take the lead in the continuing development of the company’s governance structures, policies and procedures.
Wing said: “I’m extremely passionate about making sure we do the right thing for our clients.”
“Having worked in Financial Services Authority and Financial Conduct Authority (FCA) regulated business for over 17 years, my appointment to the main board at Age Partnership will allow me to provide a consistent focus on conduct risk at the highest level of management.
“With the ultimate aim not only to make continuing improvements, but also to drive up standards across the sector by setting a positive example,” he added.
Wing, who was previously head of risk and governance at Age Partnership, is a well-known figure across the finance industry having held the positions of CF1, CF10 and CF11, which include compliance oversight and money laundering reporting officer roles, within other regulated businesses.
Age Partnership chairman Andrew Thirkill added: “David has been instrumental in developing Age Partnership’s governance and risk management framework. Over the past four years he has managed a combined compliance, training and competence team of forty professionals to influence culture and drive through change.
“His appointment to the board will enable him to drive forwards, working alongside the FCA to deliver the best client outcomes at Age Partnership and of the equity release market overall.”
Joining from Age Partnership where he was academy manager, in his new role Mansell will be recruiting and nurturing new talent within the industry, as well as supporting Equity Release Supermarket’s existing specialist advisers with training.
The company said as the need for more dedicated equity release advice is required, setting up a specialist academy is the next natural step to ensure that quality of advice is maintained as the business expands its national network of advisers.
The academy’s programme will attract new experienced equity release advisers who want to develop their skills and inexperienced advisers who strive to achieve excellence during their academy experience.
Head of compliance Graham Evans confirmed that the company has recruited its first trainee equity release adviser – Joshua Adekoya – who will complete training over a 12-month period.
Evans confirmed that the company will fully support him with the completion of enhanced qualifications after he joins the company on the 10 September. Evans also confirmed that Mark Gregory will be sharing Joshua’s progress via a dedicated blog on the company’s website.
Graham Evans, said the equity release marketplace is evolving at such a pace that is becoming increasingly difficult to find qualified equity release specialists that meet the high standards of advice.
He added: “We are delighted to secure the service of Ryan Mansell as our academy and development manager as the Academy will allow us to nurture new talent as they gain their specialist knowledge.
“Ryan will also be able to support our existing advisers to maintain their excellent product knowledge and expertise as new lenders with innovative new products enter the marketplace.”
Both complaints, from unidentified complainants, suggested the omission of an interest rate on the equity release products promoted in the March advert was misleading.
However, the ASA countered that as a broker, offering advice on whole of market home reversion and equity release, no single product was being promoted, making it impossible to offer an interest rate.
Age said there are 374 individual equity release plans across the whole of the market, some of which had interest rates that fluctuated daily or were variable.
The firm explained that if it was to reference a specific interest rate on its TV ads they would have to take a ‘typical’ view which would involve taking an average of the hundreds of lifetime mortgage plans available, with the result that the rate quoted would not be representative of reality for the majority of viewers.
“The rate could date instantly and would not be relevant for individuals suited to a home reversion plan,” it said.
Irrelevance
The ASA refused to uphold the complaint.
The ASA considered that consumers would understand that the example shown in the ad promoted a lifetime mortgage, a common type of equity release scheme which was one of the types of equity release products offered by the advertiser.
It said: “We considered that consumers would understand that the ad provided general information about how a lifetime mortgage worked, rather than referencing the specific terms of the product and was an illustration of the type of experience consumers may have when opting for a lifetime mortgage.”
It added: “We noted that the on-screen text in the ad stated “equity released, plus accrued interest to be repaid upon death”, which indicated that interest had to be paid on the product, although a specific rate was not referenced in the ad.
“We considered that consumers would understand that interest rates for a lifetime mortgage would vary based on the plan provider chosen and an individual’s financial circumstances.
“Therefore, we concluded that the omission of an interest rate on a lifetime mortgage as featured in the ad was not misleading.”
Brokers who place their cases with Age Partnership through Knowledge Bank will receive a 20% higher proc fee than they would by going direct.
Currently, Age Partnership has a proc fee of 1.5%, which would be bumped up to 1.8% should brokers use Knowledge Bank.
Brokers who sign up to Knowledge Bank will be given an option to say whether they have the relevant permissions to transact equity release business.
If qualified, they can access the pertinent criteria to place cases themselves.
If not, they will be able to refer their clients to Age Partnership.
Success story
Over 2017, the equity release market soared past £3bn in lending, a figure that Age Partnership expects to grow further as more borrowers are coming to the end of their interest-only mortgage terms.
“The equity release market was undoubtedly one of the success stories of 2017,” said Adam Carnall, head of partnerships at Age Partnership.
He continued: “We have seen this market grow substantially in terms of product offerings but also the increasing sophistication and complexity of the criteria that sits behind the headline rates.
“This is why it was such a wonderful fit for us to create a partnership with Knowledge Bank who offer such a vital service in dissecting thousands upon thousands of criteria to enable brokers to get the right case to the right lender.”
Nicola Firth, chief executive officer of Knowledge Bank added: “Age Partnership is a very well respected and award-winning broker and so we knew they were the best equity release organisation to have secured this partnership with.
She continued: “We wanted to create an environment where brokers could have real choices with their equity release business and fundamentally enjoy the best of both worlds.
“Whether they are qualified to advise on equity release or not, the Knowledge Bank system offers them a simple, practical solution to either proceed with a case or refer it to one of the leading and most highly respected brokers in the country.”
Member firms will be able to register as introducers with Age Partnership, a later-life and equity release master broker, in order to introduce consenting clients requiring specialist advice in this area.
Once an adviser has become an introducer, they will be able to work with a specialist to provide later life and equity release advice that they may not be experts in.
Age Partnership said the offering includes a no-cross sale guarantee, access to a whole of market panel, exclusive products, as well as introducer commissions that will be paid within seven days of completion.
According to Age Partnership, the average commission received by an introducing adviser in 2017 was £1,429 per referral.
John Coffield (pictured), head of Paradigm Mortgage Services, said: “The need for quality later life and equity release advice has never been greater, as older clients require a range of service – particularly in terms of utilising the value of their properties in order to satisfy pre- and post-retirement demands.”
Rapid growth
Indeed, the equity release market has witnessed a recent boom, passing £3bn in lending over 2017.
Adam Carnall, head of partnerships at Age Partnership, commented: “The later life lending market is enjoying rapid growth, and raising awareness of the solutions available through the advisory community is one of the fundamental aims of our partnership proposition.”
Coffield continued: “The expectation has to be that this sector will continue to grow rapidly in the years ahead.
“Not all advisers have the necessary authorisation or experience in the later life market to offer advice, however I suspect all advisers will be seeing a growing number of clients who need it.
“This is why we have formed this referral agreement – to allow Paradigm member firms greater choice when they introduce clients to experts in their field.
“We are sure this will be a popular service for many Paradigm firms, and are looking forward to working with the team at Age Partnership to ensure clients have the best advice possible in this area.”
