Legal & General is launching a new lifetime mortgage with what they say is a ‘market-leading’ 4.99 per cent annual rate.
The Premier Flexible drawdown product enables borrowers whose homes are worth more than £533,000 to release a portion of the wealth stored in their property, subject to a minimum loan amount of £200,000.
L&G gave an example of borrowers - a couple who are both age 77 with a property worth £5m - who release a lifetime mortgage of £1m from their home.
| Total debt (years) | ||||
Legal & General Product | Start of Plan | 1 | 5 | 10 | 15 |
Flexible @5.19% AER * | £1,000,599 | £1,052,525 | £1,288,611 | £1,659,524 | £2,137,200 |
Premier Flexible @4.99% AER ** | £994,949 | £1,044,597 | £1,269,231 | £1,619.124 | £2,065,475 |
Debt Saving for Premier | £5,650 | £7,928 | £19,380 | £40,400 | £71,725 |
In terms of rolled-up interest, the provider stated these borrowers will be better off (when compared with L&G’s Flexible Lifetime Mortgage) immediately when the loan completes.
Indeed, after 15 years, Legal & General stated this would amount to a substantial saving of more than £70,000 in interest owed.
Nigel Waterson, chairman of the Equity Release Council, called this type of development “a genuine game-changer” for the sector.
He said: “Product innovation of this sort – together with the industry standards – will further mainstream equity release in 55 plus financial planning.”
Dean Mirfin, director at Key Retirement, said: “The introduction of a rate of 4.99 per cent, for those looking to release more significant levels of equity from their homes, is great news for advisers and their clients.”
Earlier this month, L&G announced that its equity release lending reached £201m in 2015, with £99m of lending in its fourth quarter of last year.
In April 2015, the group acquired New Life Home Finance and rebranded it as Legal & General Home Finance, launching an extended product range and enhancing operational capability to deliver higher volumes.
peter.walker@ft.com