The tied agreement is the first step of IRS plans to offer a dedicated IFA and mortgage broker service. The service enables advisers to outsource the advice to a specialist equity release provider.
Ged Hosty, deputy managing director of IRS said: “IFAs and mortgage brokers have worked out that the commissions available from equity release sales don’t compensate them sufficiently. Our new service allows an adviser’s client to get comprehensive advice at no cost or risk to the adviser, with the same financial rewards that they would have received if they had provided the advice.”
Clients receive three face-to-face meetings to ensure they are happy with and understand the product. There is no increase in professional indemnity cover for the introducer and IRS will pay 2 per cent commission. IRS also uses an average life expectancy model geared to each individual customer, which it says, is unique in the industry.
The equity release trade association, Safe Home Income Plans (SHIP), welcomed the move by HSBC. Chariman Jon King commented: "Our SHIP member survey in January predicted that major lenders would choose to enter the market in the next few years. HSBC’s decision represents a very positive step for the industry and we are sure that other major lenders will soon realise the benefit of offering their own equity release service for clients."
Dean Mirfin, business development director at Key Retirement Services, commented: “We are very surprised that HSBC has chosen to enter the market in a tied partnership that is not an independent adviser thus does not look at the whole market when advising its clients.”
A spokesperson for HSBC replied: “HSBC fully supports independent financial advice if it is in the best interest of customers. However, it believes for standard equity release planning, customers need greater advice than a conventional commission-based IFA can provide. Every customer will see an adviser personally on no fewer than three occasions, and it may be as many as six. This is a minimum of three hours’ advice.”
Nationwide calls for lenders to scrap higher lending charges
Nationwide Building Society has hit out at lenders who still insist on higher lending charges (HLC) for customers looking to borrow more than 90 per cent - or in some cases 75 per cent - of the value of their property.
Halifax, Bank of Scotland, Royal Bank of Scotland, Abbey and NatWest are all on Nationwide’s hit list and it estimates that in 2006 borrowers will spend £200 million on HLC. It’s predicted nearly 100,000 borrowers will be affected with each borrower on average paying a charge of £2,000.
After the government made a very modest change to stamp duty thresholds, the society said it remains important that lenders take action to help first time buyers. A higher lending charge certainly doesn’t help.
While it can be added to the mortgage, over 25 years, Nationwide has calculated that a £2,000 HLC could cost borrowers £3,800. In many cases, most first time buyers also have to pay stamp duty where they wouldn’t have to if it had been increased in line with house price growth.
Some lenders also charge a substantial HLC on top of higher interest rates – effectively charging borrowers twice to offset the risk of higher LTV lending at a time when repossessions and arrears are at historically low levels.
Nationwide’s executive director, Stuart Bernau, said: "Not only are higher lending charges unwelcome for homebuyers, they are also avoidable. Consumers need to be aware that the headline interest rate is not all they pay - they must also take into account the fees and charges that form part of their mortgage deal.
