Livemore Capital is the first client of Pepper’s to focus solely on later life lending.

Pepper’s servicing team will act as a white-label servicer for LiveMore Capital. 

Gerry McHugh (pictured), CEO of Pepper, said he was excited about the partnership as it represented a “new product discipline” for the specialist lender. 

He added: “LiveMore Capital is an innovator in the lending space and aligns with our approach in bringing together traditional values and technical innovation to improve the customer experience.” 

The contract also marks the first new client Pepper has signed on remotely.  

“This is particularly pleasing as it’s a clear demonstration of our ability to maintain focus on clients and customers and continue to grow our business by delivering a first-rate proposition, even amid the challenges of Covid-19,” McHugh added. 

Leon Diamond, CEO of LiveMore Capital, said: “Customer experience is an important consideration for any lender, and even more so when you are a new lender with an appetite to disrupt the market.  

“So, it was important that we chose the right partner to deliver our customer experience, and I have every confidence that our relationship with Pepper will be a long and successful one.”

Additionally, since February 2019 six new providers have entered the space bringing the total number of lenders offering a RIO to 18, analysis from Moneyfacts has found. 

The RIO got off to a slow start after the Financial Conduct Authority reclassified the product as a mainstream mortgage in March 2018. By July of the same year, there were just five products available from a choice of two providers. 

Eleanor Williams, spokesperson at Moneyfacts.co.uk, said: “Historically, many older borrowers who had retired or were shortly due to do so, found it difficult to find a new mortgage deal.  

“When the FCA reclassified RIOs as mainstream mortgages rather than equity release products in early 2018, a lifeline was thrown to many who may have previously felt trapped or not catered for.” 

The research paper House of the Rising Sum – Exploring equity release opportunities asked advisers what potential product developments they would like to see in the sector. 

Some responses said the creation of a RIO that “could metamorphose into equity release at some later stage in retirement if needed” was something that should be considered. 

Speaking on a panel at the launch event for the research, Dave Harris (pictured), CEO of More 2 Life agreed as he said: “Equity release at age 55, potentially, is going to have to last for 30 maybe 40 years and that’s a long time.”

Collaboration needed

John Somerville, head of regulatory relationships at the London Institute of Banking and Finance, said to make something like this happen and reduce silos, the industry needed to work together more to get a firm understanding of all that was on offer.

“We need more of a collaborative approach and get people to look at it as a whole later life lending piece,” he added. 

Other product suggestions 

Other ideas for product developments which were mentioned in the survey included a bundled equity release and whole of life insurance policy which generated proceeds at death to meet any outstanding costs such as funeral or property maintenance. 

Advisers also proposed lenders explore how equity release could potentially be used for planning and tax mitigation for clients with buy-to-let portfolios. 

Speaking on the panel session at The Specialist Lending Event, Cammy Amaira, director of sales and marketing at Tipton and Coseley Building Society, noted that lenders were aware of many RIO cases being turned down on the basis of affordability.

A broker at the Sandown Park event raised concerns that the high level of declines for RIOs was pushing borrowers towards equity release, which they do not want.

Amaira (pictured) said there was little lenders could do as they had to follow the Financial Conduct Authority’s (FCA) rules.

“Unfortunately our hands are tied, the regulator insists that the person with the lowest income must be able to afford the mortgage from day one,” he said.

“A lot of people have 50 per cent spouses’ pension and that’s great, but so many don’t and unfortunately when we look at the lowest income should the highest earner pass away, it’s not affordable.

“So unfortunately we have to decline so many purely on that basis and it’s very frustrating.”

However, he did suggest there was a possible alternative.

“Joint borrower sole proprietor might be able to help some of those cases if the kids are in a position to help their parents,” Amaira continued.

“Although the older borrowers might not fit in a RIO, if their children are able to help then we could do a reverse JBSP, that’s something we would consider.”

The Specialist Lending Event 2020 continues this week with free registration still available for the events at York and Liverpool.

The rate is 3.95 per cent for 10 years and it comes with a free valuation and £995 fee.

The new product has added to a RIO range that already comprises shorter, fixed-term products with no fees.

“We have refreshed our RIO mortgage range twice, having added it six months ago, ensuring we give as much choice as possible for customers,” said Nikki Warren-Dean, head of intermediary sales at The Nottingham for Intermediaries.

“We introduced a 10-year fixed rate RIO taking into account broker feedback and to ensure we’re positioned to help customers make the right decisions for their circumstances,” Warren-Dean added.

New broker portal

Meanwhile, The Nottingham unveiled a new online portal for brokers promising improvements to user experience, processes and turnaround times. The system is based on Salesforce technology and was refreshed in response to brokers’ feedback.

The updated platform should enable brokers to register in fewer than four minutes and in under seven to perform a decision in principle including electronically checking identity and credit score, The Nottingham said.

A client case could be converted into a full mortgage application and submitted within a further 10 minutes, including paying fees and uploading documents. 

“Feedback and suggestions from our broker network helped us to create the new portal. We worked with Salesforce to deliver a system built for brokers,” Warren-Dean continued.

“The new portal, combined with direct access to underwriters, simplifies and enhances the application journey,” she added.

Salesforce head of financial services, Alan Donnelly, said: “The broker wish-list formed the foundation stones for a transformed portal and digital journey for brokers.”

I don’t deny this at all and it seems like a common-sense prediction, based on the growing importance of most people’s central asset, their home, in their future financial wellbeing.  

We are certainly reaching a point for many people where, without that asset, they are looking at a very different later life or retirement living experience.

And it makes perfect sense for our industry to provide ways and means to ensure they can utilise their asset or equity to help fund those later life years. 

However, there is a nagging doubt I have around whether what we have, and what we are able to present, is totally fit for purpose?

Product distinction and advice pathways

It is all well and good having a bigger, and growing, range of potential product options for later life customers, but that is only worthwhile if there is a distinction between those products.

We also need to ensure we have the correct pathways to advice in place.

I noticed that some of the feedback from Mortgage Solutions’ Supper Club last month focused on this area with concerns raised by attendees around the marketing message to potential clients, but also whether there were too many similar products and whether a refresh might be in order in some areas.  

It’s perhaps understandable that there might be a sense of frustration from advisers if they feel providers are coming to market with ‘me too’ propositions rather than something that is genuinely unique and relevant for different types of customers.  

Indeed, while the sector has clearly kicked on in terms of activity, might we wonder whether – in order to truly push into the mainstream – we need a provider community willing to push the pace of progress and push the product envelope a bit more?  

Or maybe a new disruptor will make their mark and in turn shift the entire sector? 

Regulation not the issue 

There is also some disquiet about the current regulatory situation when it comes to the different later life lending product types, and who is, and is not, able to advise upon them.  

It has been well-documented that a large number of stakeholders believe the siloed nature of mainstream mortgages with a higher maximum age, retirement interest-only products and equity release, means the likelihood of customers getting full holistic advice in this area is limited.  

Plus, there also appears to be a reluctance from some networks to allow their appointed representatives to be active in the later life space, which might compound the problem. 

However, I am unconvinced that the regulatory situation is having a hugely detrimental impact on consumers, or that advisers are somehow shirking their advisory responsibilities in this area by only offering the product they are authorised to, rather than finding a pathway that leads the customer to the right product.  

In fact, Paradigm’s dealings with the regulator recently, particularly on later life lending, have been very positive.  

Focus from FCA

We think there’s a genuine push and focus from the Financial Conduct Authority (FCA) on getting things right in this area, particularly when it comes to older, potentially more vulnerable, customers who will clearly benefit considerably from taking advice.  

There is also industry-based movement being pursued which should help in this area anyway.

The recently announced change to the CeRER qualification is one of these, as is the greater focus on adviser and customer education on what can be achieve in the later life sector.  

More can always be done of course – we need to get better at signposting customers to advice, and clearly there is scope for providers to review their product offerings and understand where there could be gaps for different types of borrowers.  

Overall, however, it’s positive to see progress being made, and later life advice should be a key area for all practitioners in the years to come, as long as you take it seriously. 

Speaking at the Mortgage Solutions Later Life Lending Event at the Royal Garden Hotel in London, Paul Soraya, director at Viva Retirement Solutions (pictured) said RIOs had put the lifetime mortgage market at a “disservice”. 

In response to a question about why RIOs hadn’t taken off, Soraya said: “I think it was positioned as this all-conquering product that could eventually help people out of interest-only prisons and people who don’t want equity release products.  

“Unfortunately, due to affordability and eligibility it cut a lot of people out of the picture.” 

Earlier this month a Freedom of Information request put to the Financial Conduct Authority by This Is Money found that since its inception in March 2018, fewer than 700 RIO mortgages had been approved. 

Soraya added that due to RIOs being an ‘in word’ he often had people asking for the product despite the broker knowing they would not be entitled to one. Instead he said he found that “very often a lifetime mortgage actually suits them better.” 

RIO needs refocus 

Will Hale, CEO of Key Financial Solutions, said the focus of RIO mortgages needed to change to “address the needs of a slightly different customer profile” namely younger customers aged between 55-60 that often don’t fit equity release because of the loan to value they require.

He noted customers of this profile were being “poorly served” by the RIO and mainstream mortgage markets as they were often being rejected for borrowing due to issues with affordability.

“It’s positive that RIOs are encouraging customers to engage in the later life lending market, but many will end up being advised to take an equity release plan” he said.

“This makes sense when you consider current rates are broadly comparable to RIOs, many modern equity release products offer the ability to service interest and/or repay capital and they come with added protections such as guarantee of tenure and a no negative equity guarantee.

“If you consider the products side by side, equity release often trumps a retirement interest-only mortgage for many customers,” he added.

The figures were revealed after This is Money sent a Freedom of Information request to the Financial Conduct Authority.

Up to July this year, 548 retirement interest-only mortgages (RIO) had been sold in 2019 taking the total to 660.

In the latest Mortgage Solutions Supper Club, equity release advisers said it was unsurprising that RIO mortgages had not taken off because the affordability assessments were too restrictive.

Brokers said the mortgages offered older borrowers good value because the interest rates were competitive, but not many joint borrowers could pass a stress test that is based on a single person’s income.

One broker said: “The regulator is trying to get its head around why retirement interest-only mortgages aren’t selling. But we know why. There’s an issue around affordability.”

Brokers agreed that if the “affordability wrinkle was ironed out”, RIO mortgages could pose a threat to the equity release advisers if they were not talking to borrowers about the whole range of later life mortgage options.

Loughborough adds second home mortgage 

Loughborough Building Society has made changes to its lending criteria to launch a second home mortgage product.   

A second mortgage is now available, where affordability allows, on a property used by the borrower as a second home. 

It is now possible to borrow up to 80 per cent of the second home value or purchase price (whichever is the lower) providing the property is in England or Wales, for residential use and is not rented out. 

Ashley Pearson (pictured), business development manager, said: “It seems that everyone works harder and time away from work becomes more valuable, so I’m pleased to offer a solution for borrowers who would like to have somewhere to go and relax at weekends and holidays.“ 

Saffron announces JBSP mortgage for first-time buyers 

Saffron Building Society has introduced a joint borrower sole proprietor mortgage for first-time buyers.   

The five-year fix product is being offered at 3.47 per cent and aims to give first-time buyers an additional option to step onto the property ladder by allowing a family member to assist with affordability.  

The maximum loan to value is 95 per cent and the maximum loan is £500,000. 

The family member’s income can be considered alongside that of the borrowers to help cover a shortfall required to purchase the property. 

In time it is expected the proprietor’s income will increase so they can afford the loan and eventually remove the supporter. 

Anita Arch, head of mortgage sales, said: “Feedback from brokers tells us that there is increasing need for this type of product where an inter-generational approach provides a practical solution to getting more first-time buyers into properties and the benefits this creates.” 

Hinckley and Rugby BS expands later life lending options 

Hinckley & Rugby has boosted its later life lending offer adding a five-year fix deal and cutting the interest rates on two existing later life products, including a retirement interest-only (RIO) mortgage. 

The new five-year fix is priced at 3.99 per cent with fees of £199 on application and £800 on completion. There are early repayment charges stepping down from five per cent in year one to one per cent in year five and valuations are free. 

The interest rate cuts are to the two-year fix, down from 3.19 per cent to 3.09 per cent, and the RIO lifetime discount mortgage which is reduced from 3.59 per cent to 3.19 per cent. The maximum loan to value is 80 per cent for the fixes and 60 per cent for the RIO. 

Hinckley & Rugby’s suite of later life lending products is available to borrowers the society is lending to in or into retirement, including those aged 75 or over. 

Carolyn Thornley-Yates, head of sales and marketing, said: “We are always listening to what the market is telling us and there is a desire to see longer fixes for later life.” 

The partnership will give advisers in the Primis network access to Bluestone’s full residential and buy-to-let suite of products.  

This includes Bluestone’s fee-free remortgage offering geared towards borrowers consolidating debts, which was launched earlier this year.  

Hodge’s mortgage products now available to Primis’s brokers include its retirement interest only (RIO) range, equity release and portfolio buy-to-let products.  

The network will also have access to the new Hodge fixed-for-life RIO mortgage, which allows customers to fix their mortgage rate for the lifetime of the mortgage. 

Steve Seal, managing director of Bluestone Mortgages, said: “Partnering with Primis will extend our distribution and ensure that its advisers are equipped with competitive solutions to serve a growing number of customers who don’t fit the vanilla mould of high street banks.” 

Emma Graham, sales director at Hodge, added that the lender looked forward to working with Primis’s network to help clients “find the right products for their needs”. 

Vikki Jefferies, proposition director at Primis, said: “Bluestone’s wealth of knowledge and experience in the specialist lending market will provide our members with greater access to lending solutions tailored for customers with niche requirements, and we look forward to helping more of our advisers bolster their offerings in this area.” 

On Hodge, she added: “The lifetime mortgage market is constantly evolving to meet the demands of modern-day retirees, making it paramount that intermediaries are ready and able to serve this growing pool of borrowers.”