New Equity Release Products Offer Vast Improvements
Ocean have today been quoted in a difficult Equity Release article in the Daily Mail.
It was a tough decision to be involved in a potentially negative story about the industry I love, however, when the journalist contacted me to discuss the story, I was shocked at the predicament of Jane Horton.
I realise that we are changing the industry for the better and over the last five years significant progress has been made. This has meant that Equity Release mortgages are now a far more viable option for over 55s who own their own home than ever before.
However, there is much further for the industry to go and more to do to improve:
Mrs Horton would not have been left in a situation of a near £100,000 Early Repayment Charge and a 6.87% interest rate had the products in 2008 had more flexibilty and options that suited clients needs.
1) The original advisor had ensured that both partners had been involved in all stages of the advice. A complaint to the newspapers is far less likely if both clients understand all aspects of their application.
2) The clients were not advised to take a product with a variable rate Early Repayment Charge. We do not know if a fixed rate ERC was available at the time, however, lenders are increasingly offering these. A fixed rate ERC would not have led to the £96,000 charge.
3) The client had regular reviews. The clients had no reviews of their Lifetime Mortgage in the 13 years of having the mortgage. As an industry, we must do better than this. Their 6.87% rate could potentially have been remortgaged to a lower rate in the 13 years.
4) The product was more flexible. The product did not allow repayment when her husband died. Modern products have a clause where the mortgage can be repaid within three years with no ERC.
It does feel like the majority of the issues faced by this client have been improved, if not resolved by the industry, but some of the issues could still occur.
Regular reviews by all advisors, although recognised as a good idea by the industry, are still not a requirement for all brokers. The processes and timescales are left to individual firms which means that there is a ‘review lottery’ where clients are dependant on how organised and committed their advisors firm is as to whether they are ever offered a review.
Some of the onus for reviews should be placed on the clients themselves, although this may prove difficult if the clients do not understand the need for regular reviews or if they are unable to contact their broker for any reason.
Contact us if you want to find out of an equity release mortgage is right for you.