Editor’s Note: It’s a lifetime decision

Industry pundits are predicting that more lenders will follow Santander’s lead and link up with equity release providers to offer older borrowers more options in retirement.

It is good news that lenders are looking for solutions to help interest-only borrowers who have not paid off their home loans by the time they retire. News that Nationwide Building Society is extending its maximum age threshold to 85 for borrowers in retirement is also positive for older customers.

The industry does seem to be trying to tackle the “interest-only timebomb” that the City watchdog warned about several years ago. CML figures earlier this year suggested progress had been made.

Although Santander says it will not profit from the tie-up with Legal & General, customers will receive advice from a ringfenced team within Key Retirement who will discuss products only from the one lifetime mortgage provider. Borrowers may ask to be referred onwards to receive whole-of-market advice from Key but, in practice, many may trust their bank to give them a special deal with a partner business and simply take what is initially offered.

Brokers will be wondering whether a direct referral for whole-of-market equity release advice would have better served the interests of Santander’s borrowers. If this is not a commercially driven move, why not make the default option an adviser who can compare all the rates on offer and all the criteria?

L&G’s products are competitive but that is not the only consideration for borrowers looking to secure the best deal.

Opting for a lifetime mortgage is a huge decision and borrowers need to be fully informed to ensure they make the right choice. Given that one of the drivers for this deal is helping interest-only borrowers who took out mortgages without adequate repayment plans, surely the industry needs to be extra careful to ensure these customers make a sensible decision this time around.

The Mortgage Market Review has resulted in more borrowers taking whole-of-market mortgage advice. As the range of options for older borrowers continues to expand in both the conventional mortgage and equity release sectors, whole-of market advice is the only way to ensure customers make the right choices to get the most out of their property in retirement.