New equity release lender OneFamily has swelled its Lifetime Mortgage range with the launch of two flexible interest-paying products.
The fixed rate Lump Sum Interest Payment Lifetime Mortgage is available with a monthly interest rate (MER) of 5.37 per cent at a for the firm’s standard LTV. The rate for the ‘Lite’ product which has a lower LTV level is 5.18 per cent.
The annual interest rate equivalents of these products are 5.30 per cent and 5.50 per cent respectively.
The variable monthly interest rate for the lite LTV option is 3.50 per cent or 3.70 per cent with standard LTV.
This increases to 3.56 per cent and 3.76 per cent for an annual rate of interest. The variable interest is calculated from the product margin (2.50 per cent, 2.70 per cent MER) plus the annual consumer price index.
The interest rate will be capped at 7.50 per cent, 7.70 per cent (MER).
A completion fee of £695 can be paid on completion or added to the loan.
Simon Markey, chief executive of the firm said: “These products will enable the whole family to come together to decide how best to manage their lifetime mortgage, including how the interest payments will be met.”
Early repayment charges are fixed for first 10 years after completion of the advance, 6 per cent years one to five and 3 per cent for between six and ten years.
The loan is available for borrowers aged 55 on completion of the advance, with a maximum age limit of 100.
Provider view
Georgina Smith, managing director at OneFamily, said: “Our new products mean consumers can repay up to 100 per cent of the interest on the loan at either a variable or fixed interest rate, in the same way you would with a mainstream interest only mortgage.
“Obviously with variable interest rates there is the risk that the monthly payments may change in the future. However, OneFamily has considered this and gives consumers the option to fix their maximum monthly interest payment, even if they have a variable interest rate.”
“If the consumer chooses to fix their monthly maximum interest rate and if interest rates increase above the agreed figure, any additional interest will be added to the original loan and would be paid back at the end of the term.”
Adviser view
Tony Larkins managing director of Cambridgeshire-based Beacon Wealth Management, said: "As a company, we have probably been involved with one equity release case over the past decade. I am qualified to advice in the area but the clients we have tend to be wealthy individuals who would have no need for such products. I don’t think it is an issue of people not knowing about equity release – it is not too difficult to get information about it. However, a lot of people probably do still consider them as last resort products.”
Charges
£695 competition fee
Verdict
The equity release market is a burgeoning one. Equity release lending volumes grew to £2.1bn in 2016, a year-on-year increase of 26 per cent, according to Key Retirement. Perhaps this is a reflection of the increasing need for an income solution for a great number of people in or approaching retirement. Or perhaps grandparents are releasing the equity locked into their property to help fund their grandchildren’s future. Whatever, the reason, like the conventional residential mortgage market, the equity release space is becoming increasingly competitive, with the emergence of new entrants. With rates for lifetime mortgages now as low as sub five per cent, taking out an equity release product has never been cheaper.
