Legal & General Home Finance
Welcoming lifetime mortgage innovation
Innovation is key to growing the retirement lending sector. At Legal & General, we believe offering customers choice and flexibility in retirement is essential to meeting the needs of Britain’s retirees and securing better retirement outcomes, and so we welcomed the FCA’s recent announcement on Retirement Interest-Only (RIO) mortgages.
The UK’s population is ageing, people are living longer, and retirement has therefore changed. This is a period in our lives that can now last 20 or even 30 years, and it’s different for everyone. The later-life lending sector needs to evolve to reflect that increasing longevity and the varied nature of retirement. New solutions such as RIO are one avenue, and provide improved choice for borrowers with dependable incomes throughout retirement.
However, while RIO does offer better access to borrowing for older homeowners, it’s far from beingthe solution for retirement borrowing, and there are issues that need to be addressed, even for those for whom RIO has been specifically designed.
The last mortgage they’ll need?
It certainly won’t be a solution for everyone – a secure, guaranteed and consistent pension income in later life, enough to pass stress tests, isn’t the norm. Retirement income is increasingly becoming more ‘lumpy’ as retirees draw their funds from investments or pension drawdown.
Unlike traditional lifetime mortgages, RIO won’t offer fixed interest rates for life, so customers will be exposed to any future base rate rises by the Bank of England. This is something firms offering the product will undoubtedly need to consider, as well as the effects of increasing living costs on what the borrower can afford.
The impact of significant life events also needs attention. Lenders will need to assess how the death of a spouse, or a move into residential care, could impact on income and expenditure for the remaining customer.
And it’s the same for those customers who find themselves needing domiciliary care in the home during retirement. Would the cost of this care and support mean they can no longer afford the interest payments?
Clearly, for many RIO customers, the product will not be the last mortgage they ever need, and instead they might need to look at a lifetime mortgage later in retirement.
Bridging the gap
RIO is a positive step, but it’s only part of the solution for older borrowers. At Legal & General, we believe the real opportunity to deliver the flexibility consumers want, and where we can bridge the gap between interest-only and traditional roll-up products, is with so-called ‘hybrid’ lifetime mortgages. That is why we have launched a new Optional Payment Lifetime Mortgage (OPLM).
Fixed rates for life, but with the option to pay off interest each month. No affordability assessment, and long-term certainty that payments will never increase. Guaranteed tenure for life, even if the customer’s income changes and they can no longer pay, or no longer want to pay, the monthly interest.
This isn’t the only innovation Legal & General has planned. However, OPLM is a direct response to the growing customer need identified by the FCA for a different kind of retirement mortgage, one that we believe provides genuine flexibility for borrowers, to help them get the most out of later life.
Steve Ellis, CEO
Pure Retirement
The ER market is growing from strength to strength and so are we, expanding our team once again with mortgage processors, administrators and underwriters to ensure we’re on hand with all the support you need.
Our new and improved case tracker has launched this April, encompassing your feedback and evolving in line with your needs.
The enhanced facility now enables an at-a-glance view of cases with nine stages of detail and an improved search function on multiple fields. Estimated and actual property values can be viewed, alongside loan amount and commission. And there are simple download functions for application forms and all required data, streamlining the process for increased ease of access.
Our Pure Max Range has also been refreshed, with the same great fee packages and cashback options, and now with the added bonus that your clients no longer need to wait six months to access their cash facility. Customers can choose between Max Drawdown Lite, Max Drawdown and Max Drawdown Plus products, for the highest non-impaired LTVs in the market, all of which have received 5 Star Moneyfacts Award Ratings for 2018.
Back by popular demand, we’ll be hosting our Spring Term webinars this May, including updates on the ER market from Council Chairman David Burrowes, and details of new tools and resources for equity release advisers from AirSourcing’s Ray McCarthy.
Our face to face roadshows will also take place this June, for advisers new to the market or considering entry. With venues in Leeds, London and Southampton, there will be speakers on marketing and website development for your business, alongside top tips from surveyors and ER solicitors on facilitating the process to completion for your clients. Look out for information on the Council website or feel free to contact us directly for details.
And we’re delighted to be named Yorkshire’s Number One Business in Yorkshire’s Fastest 50 growing businesses for 2018. Thanks to everyone for all your ongoing support.
Responsible Life
Responsible Life would like to take this opportunity to introduce their new HNW Lifetime Mortgage Partnership Programme.
According to their internal data, there was a 181% annual increase in the number of applications made for homes valued at £700,000 or more. [1] On the basis of this growth, two things became clear to the Responsible Life team looking forward to 2018. Not only is equity release capturing the attentions of the full spectrum of the UK’s older homeowner demographic, but also that it is important that these clients are represented by the services on offer.
The new HNW trading arm is designed to embrace the burgeoning variety in the later-life lending market. It is becoming increasingly clear that the reasons for choosing equity release are broad and are not limited by either property or personal wealth.
Aimed at ensuring the needs of every potential equity release customer is met, the HNW Partnership Programme is designed to allow new and existing Introducers and Advisers to refer their most asset-wealthy clients for a discreet, private service from a team of dedicated and trained experts who specialise in large releases.
“The market for large releases is growing rapidly. We have seen incredible loan sizes, including a £3.1m release on a £20m property and have set up the HNW Lifetime Mortgage arm to deal with the growing volume.
These large releases generally come with special demands, including slotting in with other products and advice. Our HNW advisers are experts in dealing with our customer’s network of personal advisers, including lawyers, accountants and IFAs.
Our partnership with a major broadsheet media group and ultra high-end magazine groups has produced an educational programme, which we credit some of the growth in this sector to.
Equity release has become a family affair, with the larger releases generally cascading through generations – a side effect of the relaxed IHT rules on inheriting a pension.”
Steve Wilkie, Managing Director
For more information please visit us at http://www.equityreleasereferrals.org.uk/high-net-worth/ or contact us today: call 01752 422 930; or email: [email protected]
Maxlyte Financial Ltd
An equity release plan without Cashflow Modelling may be a very dangerous plan
We all know that Equity Release has increased dramatically over the last few years since “the baby-boomer generation” started to enjoy pension freedoms and the IHT rules were changed.
But what happens when their drawdown pensions dwindle? There may be issues in the future with clients who have been carefree about the amounts that they have withdrawn. Maybe they haven’t learned to budget and believe that they will always find a way. Could this be one the reason that they will need to consider equity release as they haven’t kept a tight enough grip on their outgoings?
Maybe Budgeting and ways to reduce their outgoings are important topics to raise when advising them? Fact: it is always a joy to meet a potential client who is well organised and has all their outgoings tabulated on a spreadsheet and knows where their money has been spent. But I have found them to be far and few between.
Recently, I have started to enhance my service offering by using a Cashflow Modelling program. I start by sending the prospect a fact-find electronically and request the client completes accurate details of their outgoings. This starts a new conversation which deepens our relationship from early in the interview process and builds trust. It brings into focus a more precise and accurate calculation of how much needs to be drawn down initially. If it suits the client, this can all be done with the cashflow modelling program on-line. It helps them to pinpoint exactly how much they need to withdraw to reach their immediate financial goals. It looks impressive and demonstrates that I look deeply at what they are striving to achieve
Another motive for using cashflow modelling is when I realised that in years to come, it will always clearly demonstrate, if I am ever challenged, that I went to great lengths to really help and support them calculate what they need for the long term before we even start to look at which Lender’s product best suits their needs. I can show them a cashflow forecast plan confirming how long their money, including further drawdowns, will last them. We discuss this in much detail and I do all I can to educate them. I find with cashflow modelling, it’s so easy to produce several scenarios with differing inflation rates showing how the money will see them out.
Some clients really take to Cashflow Modelling as they understand it, while others are wary. These ones need more time to understand why it works so well. In a few instances, it has put some off using equity release altogether. When they realise that with inflation, their lifestyle may need to be carefully budgeted -they consider the other standard alternatives such as downsizing or borrowing money from their family and friends or even taking in a lodger. But because of cashflow modelling, they don’t make a rash decision, they understand that although it may not need to be repaid until the distant future, seeing a detailed plan of future expenditure is very real as it clarifies their present financial situation.
I am convinced an equity release sale without using cashflow modelling is short-changing both ourselves and potential clients and could even be storing up complaints in the future because cashflow modelling proves that you have taken additional care and effort to protect their future.
Could it be that we are missing an opportunity to enhance the service we offer? May I suggest this is one area where the full equity release sales process needs upgrading? At the initial meeting, we can set out the full service that is available.
For once clients have received the money from their lender, if required we can offer them ongoing monitoring and planning of their outgoings as they can update their details via the program on-line. It can keep them on track and not over-spending from their house’s maximum release. Knowing they have a clear plan in place for the years ahead, this may also lead to more referrals, as they will feel confident about using a Lifetime mortgage as part of their retirement planning.
Cashflow modelling with our support has make their financial planning so much clearer.
As you will know some lenders insist that a financial adviser oversees all further drawdowns and goes through these with their clients. With the on-line cashflow modelling tool, this will be a simpler task for us. Isn’t this an essential part of the process to complete the job competently? It avoids potential issues in the future and if done well, will further enhance the reputation of the Equity Release Council members.
Working with Equity Release is more than just “an initial sale” and to do the job fully, it is essential to offer clients an on-going service into their foreseeable future and cashflow modelling does this with ease. There has been comment recently about the size of equity release fees charged, perhaps this additional service helps to justify our fees as we are really planning their future lifestyle.
So, if you want to enhance the service you can offer – maybe now is the time to start using cashflow modelling! I will be happy to speak to anyone wanting more precise information.
Peter Maxwell-Lyte [email protected]
Just
Join the revolution and prepare to excel. There’s still time to register!
Hot on the heels of all our lifetime mortgages being awarded Equity Release Five Star ratings by Moneyfacts, we’re pleased to introduce our Equity Release Academy to help those advisers wanting to understand how to get into this market.
With more baby-boomers heading into retirement and needing to supplement their pension savings or make them last longer than anticipated, equity release could be the solution. Analysis by Just predicts the lifetime mortgage market will boom to around £6.6bn by 2021 from the £3bn in 2017. It’s time to join the revolution and talk to your clients about it.
Providing the reassurance and certainty that some of your clients may desire through enabling them to stay in their own home in later years; used wisely, equity release could provide money to make your client’s retirement potentially that bit easier or help with your client’s aspirational needs.
OUR EQUITY RELEASE ACADEMY PROGRAMME
1. Equity Release Academy – Making Sense of ER1
2. Equity Release Academy – ER Business Development
3. Equity Release Academy – Advanced ER Planning
BY ATTENDING, YOU’LL BE ABLE TO:
- Understand principles of equity release, the types of plan available and their suitability for the client.
- Identify the types of client and how to meet their needs through equity release.
- Recognise the risks to the consumer associated with equity release.
- Understand legislation governing equity release in the financial planning context
- Evaluate the impact of equity release on a client’s taxation and state benefits.
To find out more, visit https://www.justadviser.com/support/additional-support/Equity-Release-Academy-Page/
Retirement Advantage
It’s time for a better conversation about overcoming property myths
Retirement Advantage’s new report, Home is where the wealth is,reveals that, despite 52%1 of people believing that their property equity is worth more than their pension, many are still reluctant to consider using their property as a source of income in retirement.
When asked to rank their financial assets in the order they expect them to support them in retirement, for most, property was ranked behind every other option given. 70%1 rank it behind their personal pension and nearly 58%1 rank it behind personal savings and investments.
The research also found 24%1 of people wouldn’t use equity release because they didn’t want to lose control of their property. And 16%1 said they would not consider equity release because they want to pass their property on as inheritance.
These simple misunderstandings threaten to deny people a potentially valuable source of retirement income. Rather than ignoring those barriers, we should understand them and work to overcome them.
Financial advisers are in a unique position to guide people through their options, highlighting the facts and busting the myths. Home is where the wealth is sets out 3 key recommendations to help advisers to enable their clients to get the most from their property:
- Look for opportunities to bust popular myths with clients
- Explore whether clients’ attachment to their property changes, depending on the conversation
- Encourage clients to bring their children along to conversations about retirement
Equity release won’t be right for everyone, but a thorough consideration of property alongside other assets should be part of a holistic look at retirement finance options. To find out more about dispelling property myths, and to read more about the 3 recommendations, you can download a copy of the report from www.retirementadvantage.com/adviser/support/reports/home-wealth.
1 Home is where the wealth is report, Retirement Advantage, http://www.retirementadvantage.com/downloads/home-is-where-the-wealth-is.pdf, publication date: 28/03/2018
