Equity release rates could rocket by as much as 0.75% if Financial Services Authority capital requirements go through, industry sources have warned.On the back of the Europe-wide implementation of the Basle II capital adequacy requirements, the issue concerns the classification of lifetime mortgages as investment assets rather than residential mortgages. Equity release providers had expected that the capital weighting – the amount of money placed in reserve by lenders in proportion to the amount lent – would be set at around 50%. But a memo from the Financial Services Authority places the level at 100%, double previous expectations. This has whipped up a storm in the industry and trade body Safe Home Income Plans is consulting with the regulator to reach a resolution. Simon Little, senior product and marketing manager at GE Life and chairman of the mortgage product board at SHIP, says: “It is likely there would be a 0.75% rise in rates. Discussions are ongoing with the FSA to get to the bottom of this but there is sufficient reserve in terms of lifetime and home reversion so why add more requirements on top?” Another source tells Mortgage Strategy: “If this did go ahead it would have significant ramifications for product design. What would happen to no negative equity guarantees? But Joseph Eyre, spokesman at the FSA, says: “There is a distinction between investment assets and mortgages This is something we’re discussing with the Council of Mortgage Lenders.” The CML has confirmed it is in discussions with the FSA.
- Top trends
Millions of UK homeowners could be under-valuing possessions by tens of thousands of pounds, figures out from Norwich Union have revealed.NU carried out a series of ‘wealth checks’ on their high net-worth customers. An investigation of 100 customers revealed they were underinsured by a total of 8.5m and the average customer underinsured by 85,000.One wealth […]
BMW Financial Services and Money by Mini are launching several personal finance product ranges including house insurance.
Norwich Union is raising the interest rates on its Index-linked lifetime mortgage plans from Monday June 19 2006.The annual interest rates on the index-linked lifetime mortgage will be a minimum of 4.69% (4.9% APR) and maximum of 9.93% (10.2% APR). Pipeline cases will be given until Friday 14 July 2006 to complete to qualify for […]
The failure of the widely predicted housing market downturn to materialise has served to spur more households to trade up to larger properties rather than encourage first-time buyers, according to the Royal Institution of Chartered Surveyors.
A recent survey of employers, carried out by Jelf Employee Benefits, suggests that many employers intend to utilise the new Fit for Work service in some form as an absence management tool.
News and expert analysis straight to your inboxSign up