The fixed product sits somewhere between a lifetime mortgage and a home reversion. Many may struggle to get the concept across to a client, and then struggle to get the client to grasp the real issues of life expectancy – something Just has utilised well in its enhanced annuity offerings.The real plus of Just’s launch is its roll up product. LTVs are in line with other roll ups but this marks the launch of the first lifetime mortgage that at outset will not discriminate against those who want a drawdown facility. Existing schemes, including the scheme that goes live from Prudential on October 17, charge a higher interest rate at outset for the privilege of the drawdown facility. This distorts the products’ potential benefit of interest savings in compared with taking all the funds at outset. Just provides not only a lower rate than the competition for the drawdown facility but, whether the client is opting for a single advance or an initial advance, with drawdown they will attract a rate of 5.99% annualised. This is 0.16% lower than the best fixed rate for single advances from Portman and 0.65% lower than Prudential’s annualised launch rate. And this at a time when providers are saying the rate war has ended. Where providers, including Just, are still letting us down is in the direction early repayment charges are heading. Roll up ERC can be as high as 20% of the cash advance or as low as 0%. The ERC is linked to a 15-year gilt rate. In real terms, this is a potential avoidance reason for anyone who may want to repay early. At a time when ERCs for equity release are creeping into the spotlight, this could be a thorn in their side. But a client happy to accept this will be in a position whereby buying the facility to have a guaranteed drawdown option becomes a viable consideration. The difference in cost between Prudential and Just on an initial advance of 30,000 for a client who does not end up using the drawdown facility over a 20-year period is almost 12,500 in additional interest with Prudential.Dean Mirfin is business director at Key Retirement Solutions
Just Retirement has finally announced the launch of its roll up and fixed lifetime mortgages. It has been courting the equity release market for some time and since early 2005 has been testing the water, in particular with its fixed lifetime product.