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Equity Release Update - May 2013

Reviews

For the next few months I will review each lender's legal processes, detailing potential problems and how to side-step them, and other points that may become issues if not addressed at an early stage.

The first area to address is the set up costs. When clients look at the literature produced by Aviva (reinforced by yourselves) the application costs are set out as £555, and indeed when you phone Aviva the same figure is repeated. However, the hidden costs (which Aviva describe as disbursements) are anywhere between £100-£400+. These disbursements are those incurred by Eversheds for Land Registry fees (which if the deeds are unregistered can be over £200), and bank charges (£35 each transfer) for redeeming charges and sending funds to us. We always forewarn clients at the outset to avoid any grumbles at completion.

For properties worth in excess of £1m+ (or any properties that are listed or thatch irrespective of value) despite paying a substantial valuation fee the Valuer will not provide a reinstatement value and Aviva will stipulate a Special Condition requiring a Quantity Surveyors report to determine the reinstatement figure (which can cost several thousand pounds). One way around this is to ensure the client has an insurance policy that covers an unlimited or full rebuild value (or is insured to a very high level). It is advisable to send this to your Aviva contact at an early stage for them to check (and hopefully approve).

If the property is leasehold then I will need, asap, the name and address of the Landlord. If the clients have a management company in which they have a part ownership I will need the Share Certificate. We address this early on as Landlords can be very slow in responding.

If there are mortgages/cautions on the deeds then it can take up to 3 weeks to get a redemption statement so the sooner we have the references/account numbers the better.

Issues also arise for unregistered deeds (so again it is sensible to have these as soon as possible) especially if they are stored with lenders, who can often take up to a month to release them. Unlike LV, M2L and JR, Aviva's legal processes are more demanding for unregistered properties so the sooner we can have the deeds the sooner we can complete their requirements (OS plans etc).

There are of course, as with all of the lenders, issues with divorce cases, trusts etc, and again on more complicated cases the more information/documentation I can receive before the offer is issued the smoother the case will proceed.

Despite all of the above, when comparing a like for like case, currently Aviva's Solicitors are the quickest. I was recently instructed on a case and with relative ease it completed in 6 working days.

The key is preparation - preparing the client for what is needed to get the case through, preparing the lender for any peculiarities (so that they issue the offer) and preparing the Solicitor for any issues you have identified.

News

03.04 - M2L cuts its rate on enhanced equity release mortgages from 6.88% to 6.78% for lump-sum and drawdown customers. M2L now has a market share of 16.8% as at the 3 months to 31st December 2012 up from 3.5% for the same period in 2010.

09.04 - Just Retirement sales grew to £146.2m in the 6 months to 31st December 2012 up 6.2% on the £137.7m posted in the same period in 2011.

09.04 - LV equity release sales grew 5% to £8.9m in 2012.

23.04 - The ERC publish that the equity release market has had its most successful start to the year in 4 years. In Q1 the total value of plans was £223.8m 17% higher than Q1 of 2012. The number of plans taken was 3% higher than the same period last year and the average value has grown by £7,000. IFAs account for 90% of plans taken.

25.04 - New Life re-introduce their Landlord loan on second properties for over 55s. The interest rate is 6.55%.