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Posts Tagged ‘Bank of England Base Rate’

Stonehaven Equity Release Re-Launch With 8 Year Fixed Early Repayment Charges

Monday, March 16th, 2015

Stonehaven Equity Release schemesWhen many equity release providers are competing directly in using their lifetime mortgage interest rates, Stonehaven have decided to compete in a different field by taking the bold step of moving away from Gilt-based early repayment charges (ERC’s) & introducing a fixed penalty basis covering the first eight years of the equity release loan.

With effect from 16th March 2015, Stonehaven will move its whole lump sum & interest only lifetime mortgage range of plans over to an 8 year fixed early repayment charge of 5% in the first 5 years, 3% in years 6-8 and none in the 9th year & thereafter.

 

Background to Equity Release Early Repayment Charges

Due to the nature of the product – ‘Lifetime’ Mortgage, the plans have been designed to run for the rest of the homeowners life. This can create uneasiness for some people taking out equity release schemes in retirement as they cannot always say with certainty what their future plans entail with regards to their property.

 

Equity release early repayment charges have historically been a mixture of fixed penalty, gilt based, Bank of England base rate related and even long term interest rates called SWAP rates. The majority of equity release schemes across the market today is predominantly linked to government gilts. This can be in the form of an individually selected gilt such as Aviva’s, which is based on the age of the youngest homeowner, or follow an index of gilts such as the FTSE UK Gilts 15 Year Yield Index with Just Retirement.

 

These gilt related penalties on paper can look extreme given that Aviva can charge upto 25% of the amount repaid dependent upon the gilts yield falling from inception. Additionally, companies such as Just Retirement & Pure Retirement can charge a maximum of 20% of the fall in the FTSE UK Gilts 15 Year Yield Index. Therefore, the nature of gilts leads to uncertainty of their future levels & consequently any prediction regards their future level is unknown & cannot therefore be relied upon for early repayment purposes.

 

Currently, only one equity release company offers the certainty of knowing exactly what the future penalty could potential be; this company is LV= (Liverpool Victoria). Charging 5% for the first 5 years of the amount repaid & then 3% in the next 5 years, they actually have no early repayment charges after 10 years. This have given them a niche position within the equity release marketplace.

 

Stonehaven’s Move to Fixed Equity Release Early Repayment Charges

However, LV= equity release now have fresh competition and this is the beauty of where the equity release industry is right now. Competition is driving this market forward and its with such innovations & product development that is going to extend the volume of lending in 2015, to beyond the £14 billion released in 2014.

 

Stonehaven have been considering this move previously, however with their takeover by MGM, its plans were put on hold. With a new team behind Stonehaven now, they have obviously decided the time is now right to introduce  fixed penalty equity release plan to the market. It will be interesting to see how these new fixed ERC’s are perceived. Historically, applying fixed rate early repayment charges can come at a cost and this is usually borne in the equity release interest rate with an extra levy on it.

 

At present Stonehaven have not indicated any changes to their interest rates with the lowest currently being the Stonehaven Interest Select Lite plan at 5.46% monthly (5.87% representative APR). Therefore, the fixed penalty charges look to have been absorbed into the current equity release deals on record.

 

So for anyone considering the equity release & uncertain regards whether an equity release scheme will be required over the longer term, the new equity release early repayment charge from Stonehaven could be a viable option to consider. Providing fixed, transparent & easy to understand  ERC’s with just 5% penalty in the first 5 years, 3% for the next two & zero after the end of the 8th year, Stonehaven have taken over LV=’s mantle of potentially the best early repayment charging system available in the equity release market today!

 

Further Information

To learn more about Stonehaven’s range of products attracting the new 8 year fixed penalty, please contact the Equity Release Supermarket team on 0800 783 9652 or email mark@equityreleasesupermarket.co.uk.

How Easy is it to Remortgage My Equity Release Plan?

Sunday, April 22nd, 2012

Equity release schemes have now been in existence for over 15 years in their current format. Here we answer some common questions such as – ‘Can I get a better interest rate?’ & ‘Can I borrow additional funds? ’.

 

Equity release schemes allow you to free up some or all of the equity tied up in your property and use the tax free cash for lifestyle reasons. This can be a particularly useful option for those who do not have enough cash flow and own a property, but do not wish to sell it.

If you already have an equity release scheme but for some reason you’re thinking, ‘should I remortgage my equity release?’ it may be worth your while to compare equity release rates & deals to find a more suitable product.

 

The equity release market is constantly changing, with interest rates rising and falling, and new innovative equity release schemes becoming available all the time. For instance, interest rates at the moment are much lower than they were just a few years back. So if you decide to remortgage your equity release just now, the fall in interest rates could result in significant savings for you over the long term, even when you take into account the setting up costs, which include solicitors fees, application fees etc. Not only that but you may have released all the money from your original plan & now find you require a ‘top-up’ to continue enjoying your retirement.

 

Why should I review my existing equity release plan?

With equity release schemes becoming increasingly popular, equity release providers are developing new products and schemes all the time. Something that was not an option a few years ago may now have become entirely possible. Therefore, a more suitable and pragmatic product may now be available. This means that by reviewing your existing equity release UK plan and shopping around for new options is a good idea, especially at this point in time.

 

What should I look out for?

Equity release schemes are defined as a lifetime mortgage. As such all plans have some form of in-build early repayment charge which is differentiated by the company offering the equity release plan. These penalties can exist for a set number of years on a fixed basis, or alternatively they can be linked to an investment such as government gilts or Bank of England base rate.

Particularly government gilts seem to be a favourable barometer used in today’s equity release marketplace. The two largest lifetime mortgage companies – AVIVA & Just Retirement have decided to use them, so you need to be aware of potential back end penalties if the equity release mortgage is paid off early.  Other potential suitors such as LV= (Liverpool Victoria) & New Life Mortgages will only charge a fixed percentage penalty over either 5 or 10 years, with no penalty thereafter.

 

What is the next step?

If you are considering remortgaging your existing equity release scheme you must seek the professional services of an equity release adviser who has the experience of remortgage work. The adviser should be independent, so as to have the whole range of equity release schemes at their disposal. This is important as to remortgage again will incur a new round of equity release set up costs which need to be minimised as much as possible to ensure the new equity release deal is viable.

Before you decide to proceed with an equity release remortgage, it is important to consider several factors.

Remortgaging an existing equity release plan is not just a matter of switching to a new policy.

 

The following areas all need to be assessed & equity release comparisons made: –

Current value of the property – this may have changed since the original valuation, particularly in light of recent market conditions
Age of the youngest applicant – since the original equity release plan was taken out, you will be older, thus the loan-to-value ratio’s will have increased also meaning you can borrow a higher percentage of the house value
Balance of the existing equity release scheme – this can be based on your last annual statement or by requesting a redemption statement from your lender
Whether any early repayment charges would apply? – this can be ascertained from the redemption statement that should be ordered from your existing lifetime mortgage provider. This figure can be the difference between staying & switching plans dependent & the size & duration thereof.

 

Upon collating this data your equity release adviser can make an informed decision as to whether to stay put, or it’s in your best interests to switch plans. This is where the adviser’s independence becomes important. With any new equity release application comes a new set of set up costs. However, if your adviser can obtain a free valuation, cashback or any other incentive current available, then this will mitigate some of the new charges & make the whole process more worthwhile.

Professional financial advisers from Equity Release Supermarket will have all these tools at their disposal. With years of practical experience & many advisers having worked at the likes of AVIVA & Prudential, we know how these plans can be remortgaged & transacted quickly & cost effectively. With our current crop of best equity release deals we ever had, now is definitely a good time as any to consider saving yourselves, & your beneficiaries £1000’s by switching your existing equity release plan.

 

For a FREE no obligation equity release remortgage analysis, please contact the Equity Release Supermarket team on 0800 678 5159.

Alternatively, please complete the ‘find an adviser’ contact form to book an appointment with your local equity release adviser.

 

Equity Release Supermarket is one of the leading independent, over 55’s equity release specialists who have won awards for quality & impartial advice.

They can be contacted at mark@equityreleasesupermarket.co.uk where your enquiry will be treated with strictest confidence.

 

Three Reasons Why You Can Still Benefit From A Last Minute Prudential Equity Release Application

Wednesday, December 30th, 2009

As you may be aware Prudential have announced their imminent withdrawal from the equity release market…& time is fast running out. With this in mind we briefly look at their unique scheme features & what effect this loss will have on the equity release  market as a whole.

Prudential have two equity release schemes; lump sum  & increasing cash reserve plan . Within these plans the features are found: –

  • An increasing cash reserve facility which provides a reserve that increases yearly by 1% of the original property value, upto age 84.
  • An equity guarantee that guarantees a certain percentage of your property’s value at the start of your plan, will still pass on to your beneficiaries.
  • Unlikelihood of ANY early repayment charges being applied if the plan is taken out with the current Bank of England base rate at 0.5%

 

Although, certain remaining equity release schemes  can provide a no negative equity guarantee, none of them can offer the remaining two. Therefore, if you have a future requirement whereby you wish for a drawdown plan  that offers a larger long term cash facility then the Prudential Increasing cash reserve plan could be an option.

 

Additionally, if you have a shorter term borrowing requirement, (possibly unsuccessful sale of property in the current climate) the Prudential equity release plan, with its unlikely NO early repayment charge scenario also could be an option. So, if these features are of interest & you are considering releasing equity from your property, what are the deadlines for last minute applications?

 

  • Last date for quote requests is 31st December 2009
  • Last date for applications which must be supported by a quote is 15th January 2009
  • All applications must be completed by 31st March 2009

 

For last minute queries & illustrations please ring immediately on 0800 678 5159 or email mark@equityreleasesupermarket.co.uk

 

Equity Release – Can it Be Used As a Means Of Bridging Finance?

Wednesday, October 28th, 2009

The industry definition of an equity release scheme is an over 55’s mortgage, albeit with no monthly repayments & finally settled on death or moving into long term care.

 

It is now becoming more apparent that whereas equity release was once considered a lifetime mortgage, people ‘temporarily’ have the opportunity to take advantage of one of a providers’ shortcomings in its plan features.

 

As equity release has been designed to run for the rest of the person’s life, lenders have always seeked to include potentially heavy early repayment charges, should the equity release scheme be redeemed early.

 

This penalty could be either linked to the change in government gilt rates, expire after a set number of years or as we shall discuss; link to the Bank of England base rate. It is this feature that has provided a window of opportunity should people over 55 require short term borrowing facilities.

 

Experience has recently shown that retired clients are now struggling in retirement; income from investments has fallen, annuity rates are not favourable & pensions are falling in popularity with more reliance on fund performance & contributions than defined benefit schemes.

 

Increasingly more debt is also evident in this age group & control of finances is becoming more difficult to manage in the present economic climate, credit cards & loans seeming the preferred choice. Nevertheless, there are options available that can resolve these issues – part time work is becoming more apparent to increase retired incomes. Better management of debts & more consumer information being available as the silver surfers become more online savvy.

 

Advice on the suitability of equity release schemes will primarily discuss all these options & more. Should none of the alternatives be suitable from the client’s point of view, then at this point, equity release can be considered as a last resort.

However, another one of these options would be downsizing. This would involve the emotive issue of selling a property that may have been a family dwelling for a generation. However, in order to raise the necessary funds required this may be the correct solution. Unfortunately, this option may not provide an immediate resolution.

 

House sales are eventually beginning to rise, however this is marginal at present & for someone who requires funds as soon as possible, today’s marketplace could prove an obstacle.

 

But all is not lost – & this is where a temporary bridging facility is available & can be provided by a current equity release provider. Subject to eligibility, the Prudential’s equity release schemes can meet this objective. By taking equity release now with Prudential you would be benefiting from their link with the Bank of England base rate & early repayment charges.

 

In summary, the Prudential equity release schemes will only levy a penalty should the Bank of England base rate fall from inception to the time of repayment. With this rate at an unprecedented low rate of only currently 0.5%, it is highly unlikely (but not impossible) that the rate would be lower than 0.5% in the future. It can therefore be safely assumed that if either of the Prudential’s equity release plans are taken out, whether it be their single lump sum product or innovative increasing cash reserve plan, NO early repayment charge would apply.

 

Therefore, this can be great news therefore for people who have debt issues or need access to short term funds & not have it affect their tight budgetary constraints. With no monthly repayments required, clients can raise funds this year & after a 12 month period could repay in full or partially, with only a deeds release fee of £105 being levied. This could tie in conveniently with the property market improving around this period of time.

With Prudential equity release interest rates currently as low as 6.3%, this is an excellent time to consider this form of borrowing for eligible people over age 55. So while the Bank of England base rates remains at just 0.5% it would be advisable to consider this equity release product as a means of short term borrowing or bridging finance, depending on requirements.

 

In addition to this good news, Equity Release Supermarket have an exclusive offer from Prudential until 31st December 2009. We are able to offer clients applying for the Prudential’s Increasing Cash Reserve plan a free valuation & £300 cashback on completion. So all’s not so gloomy in the equity release market as some would suggest.

 

If you require further information on these topics please contact Mark Gregory on 0800 678 5159 or email mark@equityreleasesupermarket.co.uk

 
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