Market view…
It's been an eventful 6 months. The good news is that the equity release market is continuing to grow despite the odds being stacked up against it;
First of all, there's the wonderful Trevor McDonald. Oh, how we love to see a programme headlined as 'I lost my home because of equity release'.
Next we have the crisis currently affecting the sub-prime mortgage market and the Northern Rock situation. This crisis is likely to have far-reaching consequences in a range of sectors. Interest rates for many borrowers outside the equity release market have already increased. Property prices in many areas have started to fall.
In terms of the equity release market, this credit crunch could impact 2 different areas; the lenders and your clients.
The most obvious direct consequence of the current crisis is that it is likely that Northern Rock will, at least temporarily, withdraw from the Equity Release market. While this may sound dramatic, in practice this will have little impact on the overall market as their interest rates at close to 8% annualised have in the last few months increased to the point where they have probably been writing very little business.
The crisis in the sub-prime mortgage market could also have wider implications for other Equity Release providers depending on their funding arrangements, however it is not likely to be as severe as many other sectors, since Equity Release plans are designed to be long-term and long-term rates have been less affected than shorter term rates.
As far as clients are concerned, the implications of the crisis in sub-prime mortgages could make Equity Release plans more attractive.
Lifetime mortgages are likely to become relatively cheaper than other mortgages and therefore more attractive to clients. With Lifetime Mortgage rates currently at 6.0% - 7% annualised, these now compare favourably with many conventional or sub-prime mortgages, let alone unsecured lending or credit card interest rates which can have interest rates in excess of 30% pa.
Importantly, Lifetime Mortgages are offered by providers based purely on the security of the home rather than on the individual homeowner's ability to repay interest. As a result homeowners do not need to have a certain level of income in order to qualify for an Equity Release plan. The sole requirements are that the homeowner owns the property, the property has buildings insurance and that the homeowner is aged over 55. For some homeowners, such as the self employed, those with CCJs or those with perhaps uncertain income, Equity Release therefore offers an attractive alternative to sub-prime mortgage lending.
Increasing interest rates may also encourage a number of homeowners who are struggling to meet increased monthly repayments to convert from either a conventional mortgage, sub-prime mortgage or other forms of higher priced credit into a Lifetime Mortgage. Consequently instead of struggling to meet increased monthly repayments, homeowners, taking either a Lifetime Mortgage or a Home Reversion plan, can eliminate monthly cash repayments altogether.
In addition, most Equity Release plans obviously have the advantage of offering a No Negative Equity guarantee and a guarantee that the homeowner can stay in their home until they die or move into long-term. In a difficult market this becomes even more necessary and even more attractive.
For many older mortgage holders, all this means that Lifetime Mortgages are in many ways more suitable than conventional mortgages and should therefore encourage growth in the Equity Release market.
Making it easier to do business with Stonehaven…
New Website
As you may have seen, Stonehaven have recently relaunched their adviser website to make it easier for you to find information. The changes include a direct link from the home page to the adviser site, displaying the interest rates upfront, a search functionality, a lump sum calculator and access to the latest news plus much much more.
Check it out at www.stonehaven-uk.com. If you have any feedback for us on how to improve it, please email us at support@stonehaven-uk.com
Proc Fees on further borrowing
If your client wishes to take out further borrowing (outside of the flexible cash release product), Stonehaven will pay a further commission on this borrowing.
Reduced interest rates
Stonehaven are delighted to announce an interest rate reduction which means their rates now start from 5.90%.
Here are the latest rates:
| The latest interest rates | Old | New |
| Lump Sum Lite | 6.24% | 5.90% |
| Lump Sum | 6.64% | 6.30% |
| Lump Sum Plus | 7.16% | 7.12% |
| Lump Sum Max | 7.37% | 7.12% |
| Regular Cash Release | 6.64% | 6.30% |
| Flexible Cash Release | 6.75% | 6.43% |
| Build Your Own | fFrom 6.64% | from 6.30% |
| Interest Only | from 6.42% | from 6.23% |
If you'd like to generate a KFI click here.
The highest LTVs in the market
What's more, Stonehaven have increased their LTVs on the Lump Sum Max product by 0.5%. Although this might not seem a lot, this means that if your client needs the maximum amount available, they can now borrow more than ever before.
A great reminder on protected equity
Don't forget that Stonehaven's protected equity option is still free - they don't charge a higher interest rate and there are no costs involved and it's based on the final valuation of the property. Do we want to refer to uncertainty in property prices to justify this section?
Market News…
The latest pricing
| Provider | Product Name | Rate |
| Stonehaven | Lump Sum Lite | 5.90% |
| Stonehaven | Interest Only | from 6.23% |
| Stonehaven | Lump Sum | 6.30% |
| Stonehaven | Lump Sum Plus | 6.75% |
| Stonehaven | Lump Sum Max | 7.12% |
| Stonehaven | Regular Cash Release | 6.30% |
| Stonehaven | Lump Sum with Regular Cash Release | 6.30% |
| Stonehaven | Flexible Cash Release | 6.43% |
| Stonehaven | Regular Cash Release with Reserve Facility | 6.43% |
| Stonehaven | Lump Sum with Regular Cash Release and Reserve Facility | 6.43% |
| Hodge | Lifetime Mortgage option | 6.89% |
| Just Retirement | Equity Release Plan - roll-up | 6.25% |
| Mortgage Express | Lifetime Mortgage | 6.79% |
| New Life | Flexible Lifetime Mortgage | 6.40% |
| Prudential | Lump Sum | 6.49% |
| Source: The Exchange. 18th December 2007. | ||
Equity Release Marketing Forums
For the last three months, Stonehaven have been presenting at the Equity Release Marketing Forums across England and Wales. The feedback received has been absolutely tremendous including comments such as: ‘The most useful seminar I have attended in a long time’ and ‘Very good to have a seminar without significant product bashing.’
Doing these Seminars has allowed Stonehaven to give Financial Advisers, particularly those who own their own business, some very practical hints and tips on how to market their own business and generate more leads.
A very big thankyou from all the sponsors to everyone who came along. Stonehaven would also love to get your thoughts and ideas on what you’d like to see at a Marketing Forum next year, so please email Stonehaven at support@stonehaven-uk.com if you have any thoughts.
On the couch…
Featured adviser
Name Simon Smith
Company Independent Retirement Strategies
Independent Retirement Strategies is based in Hockley, Essex and have been running for 5 years. They purely specialise in providing face to face advice on equity release.
1. What is the biggest achievement so far in your career?
What an invitation to show off! I am going to resist that temptation and share an experience that shaped my career path firmly into Equity Release. The very first case I ever wrote was for a charming 75 year old lady who had been informed by her 8 year old grandson that “Daddy says we are all going to have a holiday in Disneyworld when you die”. Fortunately she was the kind of woman that would be amused by such honesty and together we arranged the funds and the trip of a lifetime for her and her family so they could all enjoy a dream holiday. She has the memories and the photos, I have a postcard from Disneyworld and a business in Equity Release. Sometimes I feel a bit like a fairy godfather, fulfilling dreams by re-allocating my clients own assets. That’s job satisfaction!
2. What do you think is truly going to change the equity release market?
Pretty simple really: When Equity Release finally makes the leap from fringe to mainstream retirement planning. The move is inevitable and by rights should have occurred already. I feel regulation should have allowed all the benefits to come to the forefront and dispel the old historic negative stereotypes. Unfortunately ‘the media’ loves sensational stories about retirees being ripped off and is not interested in cases where people have truly benefited. Despite all the good work done by SHIP it appears that journalists have not changed their perception one little bit.
3. What couldn't you live without in your life?
So many things really! Family, friends, work etc. what I really like is balance. It’s great to wake up and know there are many and varied things planned for that day. One of my favourite activities is lunch, I just love it! Friends, business contact I don’t care as long as I have nice company and a great break in the day. The French have the right idea here – we have to admire them for something.
4. If you were to give anyone advice who was thinking of getting into the equity release industry, what would it be?
I would encourage them, there simply cannot be a financial sector with more growth potential. The market needs more people to set good examples and be entrepreneurial. But don’t think it is easy, there is a lot of background work to do and getting a good reputation means a lot of hard work.
5. What is the best news you’ve had in the last 6 months?
Not so much the last six months but the recent trend toward more flexible equity release products makes me very excited. I do believe the key to market growth is providing more choice in plans we offer our customers. Each one of our clients has different circumstances and we should look to providing varied and even bespoke recommendations.
6. If there was one common fallacy you'd heard about equity release in general, what would it be?
I am very much afraid that it is the old chestnut about losing your home and not being able to move!
7. What do you do for fun on the weekends?
I live by the sea and love being around and on the water. In the summer I am sailing my yacht most weekends and, of course, for holidays with my family. In the winter I like to ski a bit and hang out with friends.
8. If there was one thing you’d change about the current government, what would it be?
Ask the government to make clear the future tax treatment for released funds and understand how Equity Release can help reduce the benefits burden on the state and allow retired home owners the dignity of enjoying some of their own money rather than live on means tested benefits.
9. Finally, what do you think the future holds for the equity release market?
Well the answer to this is really a summation of all the previous answers. Equity Release has a brilliant future and will become a respected and admired retirement planning tool for may people. Unfortunately this will only occur when we change the mindset of a small minority of people that seem to speak and create opinion for the vast majority.
A case of wine for you and £100 for your client…
If you have a client who you know would be happy to take part in a case study, let Stonehaven know. All you need to do is make sure your client is willing for Stonehaven to contact them and potentially have their photo taken and published, and Stonehaven will give them £100 for their effort and give you a case of wine. Just fill in the details below and the first five advisers to submit their completed case study will win the prize. What’s more, if the case study is used in the press, your firm will of course be mentioned.
Please complete the following information:
Stonehaven is the trading name of Stonehaven UK Ltd. Registered in England & Wales. Registered number: 05487702. Registered office: 83 Victoria Street, London. SW1H 0HW. Authorised and regulated by the Financial Services Authority.