More 2 Life, the specialist lending arm of equity release adviser Key Retirement Solutions, withdrew from the equity release market in May 2009.
Since 2007 a number of other providers have withdrawn their equity release products including Bradford & Bingley, Northern Rock, Coventry Building Society and Prudential. More 2 Life is the first provider to re-enter the market since 2007, providing much needed liquidity.
The More 2 Life mortgage is one of few products available offering enhanced terms for customers with medical or lifestyle impairments such as terminal illness, heart disease or the decision to smoke.
Equity release provider Hodge Lifetime offers an enhanced product, which allows borrowers to release a lump sum. The More 2 Life product will have a draw down facility and protective equity guarantee.
Paul Wilson, managing director of More 2 Life, says the application process is the real key to why this product will be a success.
He said: “More 2 Life prides itself on technology and we’ve applied that experience to this product.
“In the past, enhanced terms on lifetime mortgages had very laborious and lengthy application processes, this product involves just thirteen questions for the client to fill in online, and they will receive an immediate decision in principle.”
Other providers insist on an interview with a GP, the cost of which falls to the borrower, says Dean Mirfin, group director at KRS. The More 2 Life product does not require face time with a borrower’s GP on application, the lender will verify details with the GP during the underwriting process.
“More 2 Life is making the process of enhanced application very slick,” added Mirfin. “ In a sense More 2 Life has put customers and advisers more in the driving seat. Clients will be told at a very early stage whether they qualify for an enhancement and how much they can borrow.”
The funding commitment from Partnership is initially £250 million, a serious amount of money in this cash-starved sector.
Equity release trade body Safe Home Income Plans research shows the market at £945 million new loans in 2009, down slightly from the peak of £1.2bn in 2007.
Terry Pritchard, managing director of Charterhouse Retirement Solutions and erstwhile director at KRS, said he expects the equity release market to be around £850 million this year.
“It’s great news that More 2 Life is back in the market,” he said. “It sounds like a good product and more players is a good thing for everyone.”
Jon King, managing director of Hodge Lifetime, welcomed More 2 Life’s re-entry into the market, saying: “Any new funding in the equity release market is positive and good thing for customers who will benefit from the extra choice.”
Mirfin says the Partnership funding shows a “serious commitment, and underlines how important a step the enhanced terms on lifetime mortgages could be for the equity release market. Partnership’s expertise in dealing with customers with medical or lifestyle impairments will also have played a crucial role in developing the product and they clearly think there will be demand.”
Partnership has expertise in providing enhanced annuities, and says around 30% of people buying annuities would qualify for enhanced terms.
Andrew Megson, managing director of retirement at Partnership, said: “We are delighted to be working with More 2 Life on this unique and exciting product.
“The combination of Partnership’s expertise in impaired and enhanced products, together with More 2 Life’s expertise in the equity release market means that we have been able to develop a product that will improve terms for potential customers.
“We estimate that around 30% of people over 60 will qualify for the new product.”
More 2 Life is applying the same ratio to people looking at releasing equity from their properties.
King said that on the basis of Hodge’s numbers, one in ten applications are impaired, but he said the nature of More 2 Life’s product meant that there was potential for a larger proportion of borrowers wanting enhanced terms.
“This has the potential to be a very big market,” added Wilson, who is confident about demand for the product with the draw down facility.
More 2 Life will initially distribute via KRS only, but Wilson said after one to two months, he expects to widen distribution to the whole market of financial advisers and specialist intermediaries.
He said: “The potential size of this market and the amount of funding we have available means we don’t want to restrict distribution at all.
“The only reason we’re starting with just KRS is to test our systems and make sure we iron out any issues before we take it to the whole market.”
There are three products in the enhanced lifetime mortgage suite – healthy, lite and heavy impaired, though Wilson says the heavy product is for borrowers who are still expected to live a considerable amount of time.
The lender is looking to develop other products in the future, and Wilson says he is always on the lookout for new sources of funding to allow for new products in other areas.
The product is available from 1st June 2010 and the arrangement fee will be £695. The initial product rate is 6.99% to 7.49%, minimum initial cash release £15,000 and minimum further advance £10,000. The minimum property value is £70,000 and there is no maximum. Minimum borrower age is 55, with no maximum age.
LTVs vary depending on the borrower’s age and health, but Wilson said the maximum LTV for an 80 year old is 48% and for a 74 year old, 42%.
He added: “We’re about two points above the highest LTV out there, soon to be three points above.”
Both Partnership and More 2 Life are members of Safe Home Income Plans and the new product meets all of SHIP’s requirements.
