Equity release provider Stonehaven has cut rates for its full range of ‘interest select’ lifetime mortgage products, which the firm said would have a “definitive life span” as a result of likely interest from advisers.
The monthly interest rate on the loans across the range have all fallen by just shy of 0.5 per cent, the firm said in an announcement, with in particular rates falling on:
• ‘interest select lite’ loan from 5.94 per cent to 5.46 per cent;
• ‘interest select’ from 6.03 per cent to 5.56 per cent;
• ‘interest select plus’ from 6.08 per cent to 5.60 per cent;
• ‘interest select max’ from 6.78 per cent to 6.30 per cent.
The move will mean that for a typical client, paying 100 per cent of the interest and borrowing £50,000 on interest select lite, the interest payable would be £230 per month, reduced from £251 per month, or £4,862 over an expected 20-year term.
Tom Evans, managing director at Stonehaven, said it secured a substantial tranche of new funding for the product from its backers, but that expected demand would mean it will have a definitive life span.
“The interest select range offers a potential solution for homeowners who are carrying residual mortgage debt into retirement and no longer have a suitable repayment vehicle in place.
“A growing number of homeowners are facing restricted lending criteria from the mainstream lenders and are unable to clear the hurdles imposed by the MMR rules brought in last year.”
Stonehaven’s flagship product range was introduced in 2006 and it claims to have been the first lender to allow borrowers to pay some or all of the interest charged each month and potentially eliminate the impact of interest roll-up.
Currently, there are industry concerns that the European Mortgage Credit Directive, could erode “safeguards” around equity release mortgages with its proposed changes to the definition of a lifetime mortgage.
According to Andrea Rozario, former director general of the Equity Release Council, the present rules distinguish between ‘regulated standard mortgage contracts’ and ‘regulated lifetime mortgage contracts’, the latter of which are governed by separate rules.
Ms Rozario said that removing the reference to ‘older customers above a specified age’, as well as a sweeping redefinition of standard mortgages to include anything that includes an element of capital repayment will merge the distinctions between the two types of equity release.
As a consequence, when this new definition is adopted, any product which does not comply with it will cease to be regarded as a ‘lifetime mortgage’ and will be treated as a ‘standard’ mortgage.
The MCD applies to a wide range of loans, with limited exemptions including lifetime mortgages, bridging loans and credit union mortgages.
peter.walker@ft.com
