Mortgages  

Product review: LV Lifetime Mortgage LumpSum+

Product review: LV Lifetime Mortgage LumpSum+

A new equity release product has come to market after LV introduced the Lifetime Mortgage LumpSum+ to its product range.

Its predecessor, the Lifetime Mortgage Lump Sum, is now closed to new business, although existing customers can still apply for additional borrowing.

All advisers in the process of discussing applications with customers will have the opportunity to switch. The loan-to-value ratio has been increased by 5 percentage points at each age bracket, ranging from 25 to 55 per cent, from age 60 to 95.

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A minimum lump sum of £10,000 is required and interest rates between 5.3 and 5.6 per cent are applied to the initial level of borrowing. LV has sourced external funding for this product, given that previous business was financed from enhanced annuities which have reduced in number since the introduction pension freedoms.

It can be used to generate a lump sum for a specific purpose such as home improvements or a maximum loan can be agreed. No interest will be collected until repayment of the loan, which will apply on death or being taken into long term care, whichever happens first. A fixed interest rate is agreed at commencement, added daily to the amount owed and compounded on a yearly basis.

www.lv.com

Comment:

With growing uncertainty around the future of pensions, equity release is likely to become an increasing consideration for those looking to access capital in retirement.

The pension freedoms will almost certainly have an impact on the equity release market, as advisers and consumers alike attempt to strike the balance between capital and income.

As many retirees will still heavily rely on pensions as their primary source of retirement income, homeowners with small levels of accessible capital could benefit from this product.

It is also welcome news for those who have reached retirement age with outstanding mortgages – especially individuals or couples who rely on endowments or savings which have not performed as anticipated.

Although not market leading, the interest rates on offer are certainly competitive and with a minimum lump sum of £10,000, this product will cater for those who only require relatively small funds or wish to retain a higher loan-to-value.

The challenge for equity release will always be the maxim ‘an Englishman’s home is his castle,’ and so other options are likely to be considered first. However, castle maintenance has to be funded from somewhere.