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Posts Tagged ‘Gilt Rates’

Aviva Announce News of the First Sub 6% Equity Release Interest Rate for over 5 years!

Tuesday, February 7th, 2012

Aviva today announce an exclusive 5.92%pa interest rate to Equity Release Supermarket on its Lifestyle Flexi plan.

News had it that 2012 was going to be a breakthrough year for the Equity Release Market. Today this statement was confirmed.

The first sub 6% annual interest rate for over 5 years will have a major impact on the equity release market & confidence in general.

Ironically enough, this followed news earlier in the day from Just Retirement that it had just reduced its own rate in reaction to Aviva’s a week earlier. The new Just Retirement rate of 6.15% pa was considered extremely competitive until Aviva gatecrashed their party later on in the day.

Today’s groundbreaking news on the Aviva Lifestyle Flexi plan has come hot on the heals of my previous news items of 27th January  & 30th January in announcing earlier Aviva and LV= rate reductions.

 

So why is there such an equity release interest rate war currently?

We need to look at the market as whole, the recent economic factors & how these companies are funded.

Both Aviva & Just Retirement are big annuity providers & companies with the backing of annuities have been able to ride the storm, ever since the credit crunch began a few years ago. You may be aware that most equity release companies with bank funding such as Saffron, Coventry Building Society & Hodge Lifetime to some degree, have dropped out of the market. Longer term funding has been an issue for them.

 

However, this doesn’t answer the whole story, so lets look a bit deeper…

We have mentioned the credit crunch. It is evident first hand from our Equity Release Supermarket data that a significant element of equity release loans are for financial, rather than lifestyle factors. This means there is a greater emphasis on ‘need’ rather than ‘wants’.

Retirees in general are finding retirement a financial struggle in trying to make ends meet. Overall attitude towards retirement & their legacies has also changed over the years with a more ‘live for today’ motto. With drawdown equity release plans becoming increasingly popular, this lends true to our analysis.

People are taking just enough for today to clear debts, help the kids & have a small amount behind them to provide that ‘cushion’ that provides them with a feel good factor.

 

 

The Aviva Lifestyle Flexi Deal in Finer Detail

Market leading fixed interest rate of 5.92%
£500 cashback on completion
FREE valuation upto £1 million
Drawdown equity release scheme
Earliest age for application of 55 years
Minimum £10,000 initial loan
Minimum property valuation of £75,000

 

In addition to the great news on their lowest interest rate for years, now is as good time as any to take out an Aviva Equity Release Plan. With both a £500 cashback & free valuation offer, the net set up costs for an equity release application are now minimal. With Equity Release Supermarket’s advice fee being lower than its major competitors, then now is the time to seriously considering taking out an equity release plan with Equity Release Supermarket, if you have strong intentions to do so anyway.

 

Early Repayment Advantages with Aviva

With GILT rates at a current all time low, it would also favour equity release lenders who use gilts to govern their early repayment charges. Aviva use an individual government gilt to measure whether a future early repayment charge will apply. The yield of this gilt is noted on the day the equity release plan starts. Upon redemption, the yield is noted at that point & gauged to see whether it has it increased or fallen during that period.

 

Should the gilt yield have increased or stayed the same then NO penalty will apply. Aviva will even permit a reduction of 0.12 basis points before even applying a penalty. Therefore, with gilt rates currently being so low, there is less likelihood of the yields falling today than ever previously. However, this cannot be guaranteed & if you are considering early repayment then please speak to our team of advisers first.

With a national team of equity release advisers who can provide both face-to-face & phone based financial advice, we are only a telephone call away from offering you a market leading equity release deal.

If you would like to take advantage of a free initial consultation regarding the Aviva or any other equity release mortgage, please call the Equity Release Supermarket team on 0800 678 5159 or email mark@equityreleasesupermarket.co.uk

 

The following links provide further equity release information: –

Request an Aviva quote  | Request a Just Retirement quote  | Find a local adviser |

Equity Release Calculator

 

LV= Follow Suit In Latest Round of Equity Release Interest Rate Cuts

Monday, January 30th, 2012

Following on from the post on Friday regarding Aviva reducing its equity release interest rate on their Lifestyle Flexi plan (drawdown scheme), another lender has now followed suit.

LV= (Liverpool Victoria) today advised that it is also to drop its rates with effect from 1st February 2012 on both its Lifetime Mortgage  – lump sum plan & the Flexible Lifetime Mortgage  – drawdown scheme.

 

The corresponding rates are as follows: –

Lifetime Mortgage – lump sum – 6.39% (6.60% APR)
Flexible Lifetime Mortgage – 6.49% (6.8% APR)

 

Although interest rates are higher than the two largest providers – Aviva & Just Retirement, LV= do have some quality features that make it stand out from the crowd.

Firstly, their early repayment charges are fixed. This means that there is no link to gilt rates as the basis for the early repayment charge calculation, like Aviva & Just Retirement do.

LV=’s early repayment charges are known from the outset & are 5% in the first 5 years & 3% in the next 5 years. For some this can be reassuring news should their circumstances change in the future & early repayment is necessary.

LV= also allow partial repayments, subject to a minimum of £5,000 so if you are looking to work around potential early repayment this can be planned accordingly.

 

Equity Release Supermarket currently receive a free valuation with LV= with no current deadline. So now is as good a time as any to be considering an equity release application with the recent interest rate reductions across the board.

If you wish to obtain a quotation or advice on any of the LV= equity release schemes, please call our freephone 0800 678 5159 or email mark@equityreleasesupermarket.co.uk

 

More Great News For The Equity Release Market As New Life Mortgages Return With Lowest Interest Rate

Wednesday, November 3rd, 2010

Signs are certainly showing of a recovery in the equity release market as news that existing SHIP member – New Life Mortgages are returning with two new competitive products.

They arrive on the back of the recently launched impaired life equity release lender; more2life at the beginning of October.

 

Although New Life Mortgages hadn’t officially withdrawn from the market in 2009, it remained in the market whilst new funding sources were explored..

That time is now & details of the revamped equity release schemes can also be found on the Equity Release Supermarket website by clicking here.

 

New Life Mortgages have decided to make a statement, by not only relaunching their product range, but also arriving with the lowest interest rate in the market at just 6.35% monthly.

The Lifetime Fix and Lifetime Gold products both position themselves into the ‘roll-up’ lifetime mortgage range & are designed to be the most competitive equity release products in the market for the over-55’s.

 

The New Life Gold product is designed to offer the maximum release possible for a client in good health. Plans start at age 55, with a release of 20%, thus offering the maximum release currently available in the equity release market.

 

The age related percentage’s that can be released are as follows: –

Age 55 – 20%

Age 60 – 25%

Age 65 – 30%

Age 70 – 36%

Age 75 – 41%

Age 80 – 46%

Age 90 – 51%

 

The product is uniquely available only on a single life basis & has a very competitive interest rate of 6.75% monthly. This compares favorably with its peers at the maximum release end of the market who would be Aviva & new entrant more2life.

As an extra incentive, New Life Mortgages are offering £300 cashback on NLM Gold cases that complete prior to December 29.

 

The Lifetime Fix is the second product on offer from New Life Mortgages with the lowest rate currently available in the equity release market at just 6.35% monthly.

Available on a single & joint life basis the plan releases a lower amount than the Gold product, starting with a release of just 17% of the property value at age 55.

As an added incentive New Life are offering £600 cashback on cases completed before 29th December, so if you are considering equity release with a low interest rate hurry!
Both schemes have a minimum acceptable property value of £60,000, which again is the lowest in the equity release market & may bring previously ineligible applicants a new lease of life?

If early repayment charges are an issue with some lenders relying on gilt rates, New Life Mortgages have a more conventional attitude with the simplistic rate of a 5% penalty in the first 5 years. Thereafter no penalty exists.

This could obviously favour people who may have shorter term retirement plans with their properties, although equity release UK schemes are designed to run for the rest of your life.

 

Should you require a product fact sheet or quotation on any of these New Life Mortgage products, please call the Equity Release Supermarket team on 0800 678 5159 or email mark@equityreleasesupermarket.co.uk

 

Equity Release Early Repayment Charges – The Truth

Tuesday, May 4th, 2010

Anyone considering taking out equity release  has many choices to make.

 

One of the biggest & most expensive if not advised correctly could be on early repayment of an equity release scheme .

However, before we delve into the main differences between current equity release schemes we briefly look at why early repayment charges exist & how they can arise.

 

Primarily, equity release is designed to run for the rest of your life.

 

There is no fixed term & the scheme will continue to run until the second person has died or moved into care.

At that point the property is usually sold, with the equity release provider being repaid first from the proceeds & any remaining balance is passed into their estate.

 

With the earliest age of starting one of these schemes being 55, the total term could well be in excess of 30 years. For this reason lenders hedge their bets in order to recover any potential early repayment which may cost them significantly.

 

Obviously life expectancy for everyone differs.

 

The Financial Services Authority (FSA) use average life expectancy data in order to provide the basis of a lenders key facts illustration (quote).

It is with this same information that lenders will also formulate their early repayment charge structure.

We can relate such charges with a conventional mortgage, whereby upon early repayment within a specified term the borrower will incur an early repayment charge.

 

So, upon what circumstances would an early repayment charge exist?

 

This could be for a number of reasons: –

 

1.       Sale of property

2.       Inheritance

3.       Death

4.       Moving into long term care

 

However, not all the aforementioned would incur a penalty upon early repayment.

Equity release providers would not invoke a penalty on death or moving into long term care. Additionally, where some lenders invoke a charge for a set period of time, once this term has expired there would be no penalty thereafter.

However, there would potentially be a penalty if the property was sold during the lifetime of the owner for example if an inheritance was received or downsizing occurred & the scheme was repaid as a consequence.

 

In addition to the early repayment charge the lender could also levy an administration fee which can vary from zero to £300.

 

How do lenders calculate the early repayment charge & how much can it be?

 

The answer to this varies significantly & this can be evidence with the following simplified table: –

 

Lender

Term

Basis

Maximum Charge

Aviva Remainder of the plan term Charge linked to performance of gilts. Maximum 25% initial advance
Hodge Lifetime 10 Years Percentage penalty based number of years 5%
Just Retirement Remainder of the plan term Depends on the FTSE UK gilt yield Maximum 20% of total advances
LV= 10 Years Percentage penalty based number of years 5% yrs 1 to 5, 3% yrs 6 to 10

 

As you can see, all equity release schemes have the inclusion early repayment charges & if you are considering early repayment it maybe a case of damage limitation or manipulation of repayment date that could avoid potential penalties.

From experience, this aspect of equity release penalties I will cover in a separate article to follow & can provide advice on methods of alleviating these penalties from lender to lender.

 
This will also include topics such as: –

  • Options on downsizing
  • Gilt rates  & where to find current gilt yields
  • Information on repayment to existing equity release borrowers who are looking for additional funds or achieve a lower interest rate
  • Possible avoidance of early repayment charges – lender by lender

 

If you have any questions or require further information on the subject of equity release early repayment charges, please email mark@equityreleasesupermarket.co.uk or contact Mark on freephone 0800 678 5159.

 

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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