Equity release buyers will benefit from more choice as Standard Life is to enter the market and increase competition.
Standard Life is preparing to introduce an equity release product, according to FT Adviser, increasing competition and giving the equity release buyer more choice in an expanding market.
These products let you release cash from your home with £3.89 billion accessed last year and this is likely to increase with property wealth in the UK reaching a record £6.08 trillion by the end of 2020.
Standard Life, part of the Phoenix Group, has funded lifetime mortgages through More2life and Liverpool Victoria since 2016 and will rely on Key to deliver products before it launches its own unique range.
New features and markets for the group
Tom Ground, managing director of retirement solutions for the Standard Life brand intends to minimise early repayment charges (ERC) associated with lifetime mortgages and make this clearer to homeowners.
All equity release products include an ERC and there are two types of plan structures to consider with different costs, either the fixed penalty or gilt based penalty.
This penalty would only apply after the ERC free overpayment facility is used first where you can repay 10% of the mortgage without charge.
Anything in excess of the free overpayment facility and a fixed penalty ERC applies a charge, typically starting at 10% in year one reducing by one percent each year until it is zero from year eleven.
The gilt based penalty is based on the 15-year gilt yields and if you repay the mortgage early, you would pay up to 20% of the mortgage if gilts fall 0.5% or no charge at all if gilts rise 0.2%.
Phoenix Group intends to use equity release as an enabler to grow their annuity business having completed £1.4 billion of bulk annuities in the first half of 2021.
They intend to expand this with the £2 trillion worth of defined benefit liabilities with scheme holders in need to secure pensions and this income can come from the equity release market.
Earlier this month Phoenix purchased part of the Just Group lifetime mortgage portfolio for £300 million and now has £10.7 billion of liquid assets under management of which a third is equity release mortgages.
Lower interest rates with competition
The equity release market will benefit with competition from Standard life offering more flexibility to customers and further product innovation from the providers in the future.
Interest rates are lower due to competition and lower gilt yields averaging 6.20% per year in January 2016 and falling to 3.95% over five years by January 2021, a reduction of 2.25%.
The interest rates change with loan to values based on age and the older you are the larger your mortgage can be at the lowest interest rate, currently 2.47% per year.
See how much cash you can release from your home and the interest rate for your mortgage at this link:
Free equity release calculator with instant figures for your lifetime mortgage.
Unlike a residential mortgage, there are no affordability checks with equity release, you can have an initial lump sum and future drawdowns, pay the interest as you go or allow it to roll-up over time.
Your home can be used to provide income for your future or many other reasons such as buying a dream home in retirement, repaying an interest only mortgage or even gifting to a family member.
There were 109 new products or 29% more introduced by providers in the first half of 2021 and this is likely to increase further with competition from Standard Life.
What are your next steps?
Speak to our London City Mortgage advisers if you are considering releasing equity from your home, we can recommend the lifetime mortgage plan and specialist legal advice.
Find out more about accessing cash and the leading lifetime mortgage products for your home with this link:
Free equity release quote with leading products and low interest rates.
Our expert advisers can source competitive products to release cash to meet your needs. Learn more by using the equity release calculator, property value tracker chart and mortgage costs calculator.
