Few customers expect to repay an equity release scheme early. However, due to recent rate reductions, some who took out schemes over five years ago are repaying. They are remortgaging to take advantage not only of improved rates but also of the added flexibility many schemes now provide.This market is no different to others in that nobody wants to pay more than they have to. The best feature of remortgaging in this market – as well as the improved rates – is the advent of more creative schemes and improved lending criteria.So what has been the change that has crept up on us over the past few months? A trend has developed toward extending early repayment charges. These are no longer limited to the typical five years. The trend is toward extending the penalties to span 10, 15 and even 20 years of the loan’s life.Lenders may well argue that in the years to come it will be hard to find rates lower than they are at this time, and they may well be right. However, what this trend could lead to is a regime whereby it will become increasingly difficult for borrowers to benefit from developments in the market.The most dramatic and obvious change has been with Northern Rock. Its fixed rate product previously had early repayment charges which applied for the first five years only. This term has now been extended to 20 years.Customers are benefiting hugely from market forces that have driven rates down, as my examples from last week show. Despite this, it is in the shorter term that flexibility will typically be exercised.If flexibility is lost, many may look more carefully at whether the lowest rate today will prove too restricting in the short-term, when flexibility might be of greater value.The increased early repayment charges are a sign from lenders that they are fearful the market is fundamentally made up of financially aware customers, many of whom will work with their advisers to do their sums and consider their options over the years.Increasing the life of early repayment charges will assist in creating a new criterion for consideration in the advice process now the differences between providers are becoming more pronounced.
- Top trends
Personal Touch Financial Services Ltd, one of the UKs fastest growing financial services networks, has appointed Mike Starkie as national sales manager.Starkie brings 15 years experience of the financial services industry and has considerable expertise in the area of building distribution channels and of enhancing the productivity and profitability of existing distributors.His role will involve […]
Michael Portillo, the former cabinet minister and chief secretary to the Treasury, says the UK was right not to join the euro, citing 13 years of growth as the bedrock of the economy. Writing exclusively in Mortgage Strategy ahead of his address at the Mortgage Summit this week, Portillo says it’s interesting that in a […]
Legal & General has continued to develop its e-business service with the expansion of its protection and general insurance products on its integrated quote and apply system, Online Protection. The product suite now includes the following products: * Family and Personal Income Plan, the family protection product with a monthly benefit.*Mortgage Payment Protection Insurance, providing […]
Cheltenham & Gloucester is repricing the rates on its three-year premium fixed rate mortgage and its standard two, three, five and seven-year fixed rate mortgages. Nick Hale, sales director at C&G, says: “Following the increase in the cost of purchasing funds through the money markets it has been necessary for C&G to review its rates […]
Health cash plan provider Health Shield has announced its 2014 results, showing yet another year of growth.
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