Until recently, equity release had been confined to the 'specialist' bracket, with high street lenders giving the sector a wide berth. However, the tables are starting to turn; equity release has seen its popularity soar in the last few years, with lending consistently hitting record levels, and now it seems that the big names want to get in on the action!
It was announced last week that Nationwide is launching into the equity release space with its first ever lifetime mortgage, offering a loan that doesn't require repayments during the customer's lifetime.
"This is Nationwide's response to today's reality," said Nationwide chief executive Joe Garner, "that many older people have considerable wealth tied up in their property, which they can't – or can't afford to – access without moving home. Our lifetime mortgage will give members access to their capital in a flexible and affordable way."
A quick overview of the product: it's available to both new and existing Nationwide customers aged between 55 and 84, and will be distributed through Age Solutions. Rates are fixed and start at 3.80%, with loans available at up to a maximum of 46% loan-to-value (LTV). There are no product, valuation or advice fees, and as the mortgage is flexible, it's possible for customers to take additional borrowing, port the mortgage if they move and make partial repayments of up to 10% a year.
Henry Jordan, Nationwide's director of Mortgages, said that older borrowers "haven't been well catered for by mainstream mortgage lenders and remain underserved by standard mortgage products," so it's hoped that this new deal will go some way to redressing the balance in the high street arena.
Nationwide's announcement follows in the footsteps of Co-operative Bank earlier this month, when it revealed that it was joining forces with Legal & General to offer lifetime mortgages to its interest-only customers.
The five-year partnership will see Legal & General Home Finance's lifetime mortgages offered to Co-op Bank's interest-only customers who are approaching retirement and don't have any means to repay the outstanding amount, or who could find keeping up with mortgage repayments difficult in retirement. Other customers may simply wish to boost their retirement funds by releasing equity from their home, one of the cornerstones of this sector.
"I am delighted to announce this new partnership with The Co-operative Bank," said Steve Ellis, managing director at Legal & General Home Finance
. "Accessing property wealth for later life is a concept that is rapidly growing in popularity amongst Britain's over-55s. There are still a significant number of borrowers who have not set aside the necessary funds to repay the outstanding capital once their interest-only mortgage matures, and a lifetime mortgage could be one solution for these individuals. [We want] to help these borrowers to manage their interest-only mortgage and get the most out of later life."
News of the latest arrival on the scene has been welcomed by customers and the industry alike, with it hoped that such a big player will raise the profile of equity release
and, ideally, boost competition between current providers for the benefit of consumers.
"Nationwide's arrival in the equity release market will be good news for customers and good news for the industry," commented Alice Watson, head of Marketing at Retirement Advantage Equity Release. "Greater competition should spur more innovation and enhance value for money. Having a high street lender in the market is also further evidence that equity release is increasingly being viewed as a mainstream retirement finance option."
It seems that these new providers have got in at just the right time, too, with research showing that equity release lending hit another milestone in October.
Figures from Responsible Equity Release show that the number of homeowners releasing equity hit a new high in October, with completed plans up 19.2% on September and 76.5% on October 2016. Not only that, but the total amount of equity released during the month was more than double (111.9%) that seen in October 2016, with individuals releasing
an average of just under £71,000 from their homes.
Steve Wilkie, managing director at Responsible Equity Release, believes that this form of lending could be a lifeline for many pensioners, particularly with low savings growth and high inflation meaning many "are struggling to cope with escalating living costs".
"Their home [can be] the only asset they have which they can generate an income stream from, and it's no surprise to see the popularity of equity release grow as a result; the industry has proven itself to be well placed to provide a genuine retirement income solution."
Now that the industry is growing, it means you have even more options if you want to release some of the cash tied up in your home, so why not see if it could work for you? Find out more by contacting our equity release advice service, and see why it's going mainstream.
Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.