Norwich Union has defended its equity release products following industry warnings that brokers could be in breach of the Mortgage Code if they recommend the deals.
In an open letter to the Mortgage Code Compliance Board, Simon Chalk, principal of Wetherby-based Mortgage Portfolio Services, asserts that NU's equity release products go against the Mortgage Code's level of service (a).
He asks: “Would an adviser remain compliant with the Code bearing in mind that with these plans a personal illustration detailing the precise penalties cannot be produced; if considering a remortgage, the penalties cannot be calculated until the actual date of redemption; and the interest rate at application will most likely not be the rate on which the advance is released?” Chalk tells Mortgage Strategy: “As the rate is calculated on the date of the advance what you pay for and what you get are different things. My concern is that brokers will get into trouble by recommending these deals.”
Chalk has also written to Safe Home Income Plans, the organisation dedicated to the promotion of safe equity release plans, asking it to review NU's membership and pointing out that SHIP's Code of Conduct states members should “provide fair, simple and complete presentation of their plans.”
The MCCB and SHIP have declined to comment.
But Paul Stokes, head of marketing at NU, says: “We always notify the client if the rate changes from the date of application, especially if rates go up. Over the past five years we've only repriced about five or six times. Our products are also not designed to be remortgaged.”
Stokes adds the products are in line with the Mortgage Code but will be re-assessed to meet FSA regulation.