Nationwide has entered the equity release market with the launch a lifetime mortgage product to "address the needs of an ageing population".
A lifetime mortgage is a popular type of equity release. It is a long-term loan secured on a property, dependent on its value and the borrower's age. Unlike a regular mortgage, borrowers don't have to make any repayments before the end of the plan.
Nationwide's target in launching the lifetime mortgage product is the £1.8trn of property wealth held by the over-55s and accessing that equity tied up in property.
There are no repayments required during the customer’s lifetime as interest is added to the sum borrowed, with a rate fixed for the term of the mortgage and the total rolled-up amount is repaid at the end of the customer’s life or if they go into long-term care.
The Nationwide Lifetime Mortgage will be offered exclusively through Age Solutions, part of the Age Partnership Group.
The relationship will see Leeds-based Age Solutions providing whole-of-market equity release advice to both existing members and new customers introduced through Nationwide Building Society.
Henry Jordan, director of mortgages at Nationwide, said: “More people are living longer and many older people have significant wealth tied up in their property.
"Nationwide has a long-term plan to increase choices for borrowers in this age group, who have not been well catered for by mainstream mortgage lenders and remain underserved by standard mortgage products.
"The new Nationwide Lifetime Mortgage will enable those with equity in their home to access their capital and use those funds flexibly to meet a range of needs."
Borrowers must be between 55 to 84. The fixed mortgage rates are divided into four tiers based on different amounts of loan-to-value (LTV). The very low LTV rate is 3.8 per cent, the low LTV one is 3.9 per cent, for mid LTV it is 4.25 per cent and high LTV has a rate of 4.8 per cent.
There are no product, valuation or advice fees and loans are available at up to 46 per cent LTV, with the amount available to borrow depending on age, the size of the mortgage required and whether it is a single or joint application.
Minimum loan size is £10,000 while the maximum is £460,000. The minimum to maximum property price is £100,000 to £1,000,000.
Customers with the product can take additional borrowing, port the mortgage if they move to a new property, or to make partial repayments of up to 10 per cent a year.
Early repayment charges (ERCs) are stepped and reduce over the first 15 years of the mortgage term, ranging from 6 per cent for 0-60 months, 3 per cent for 61-120 months, 1 per cent for between 121 and 180 months but over 181 months there is no ERC. The product will be offered exclusively through Age Solutions, which is part of Age Partnership Group.
Peter Vicary-Smith, chief executive of Which, said: "For some people equity release could be an important plank in their financial strategy, so we're delighted to see responsible players bringing new and fairer products to the market.
“As with any big financial decision, people should take professional advice and look at a range of options before making a choice."
Peter Gettins, product manager at L&C Mortgages, said: “Clearly a lender like Nationwide moving into equity release is major step and I’m sure it’ll be positive for the sector as a whole.”
