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‘Equity release products need to restrict LTV for younger customers’ – Star Letter 11/01/2019

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  • 11/01/2019
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‘Equity release products need to restrict LTV for younger customers’ – Star Letter 11/01/2019
Each week Mortgage Solutions and its sister title Specialist Lending Solutions select the most thoughtful or thought-provoking comment for Star Letter.

 

This week’s top contribution is from Andy Wilson for his response to the article: A shift to younger equity release consumers is almost guaranteed – Rozario.

Wilson said that if the industry is to target younger customers who are close to age 55, the products will need to heavily restrict the maximum loan to value (LTV).

He added: “Alternatively, they will need to be non-safe home income plan (SHIP) compliant and take away the option to roll-up all of the interest on top of the debt or have a no-negative equity guarantee.

“The fact that life expectancy is rising, coupled with the potential for a long term slowing down of house price inflation, or even deflation, means that debts could easily reach the value of the property.

“The FCA has already fired warning shots to lenders over the provision for covering no-negative equity losses as the chances of this happening seem more possible than in recent years of decent house price growth.

“The current SHIP qualifying products are, in my view, potentially unsuitable for 55 year olds unless lower lending limits are set. A maximum release of cash at today highest rates of interest could double around 3 times with normal life expectations and may outpace house price inflation.

“That is going to take some explaining to beneficiaries when the borrowers have died.”

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