News analysis: “Evolution” of the publication of shares with adapted rates

Two large equity release lenders have started to tailor rates to individual borrowers and their properties, which is expected to trigger a trend in the industry.

Earlier this year, Pure Retirement revealed that it will introduce custom interest rates based on each borrower’s zip code, property type, age, and loan amount.

The lender continues to offer rates in its Heritage and Sovereign ranges which are based solely on age and loan-to-value ratio.

It helps advisors who want to tailor their service and really break down the options, rather than closing deals as quickly as possible.

More recently, Just announced that it will offer a medical underwriting on its Just For You line with the aim of offering improved rates and LTVs to borrowers with health issues or lifestyle factors that may limit their expectation. of life.

The company has a long history of offering medical underwriting on its annuities and has done so on its lifetime mortgages, but new dedicated products and the set of about 20 health-related issues have streamlined the process and made that option. much more visible and accessible to advisers.

Knight Frank’s financial associate David Forsdyke says other lenders take health concerns into account as well, but he hasn’t always found this beneficial for the types of clients he deals with.

Forsdyke says, “Aviva has had medical pricing in its products for a long time as well, but hasn’t really made much noise about it.

They can capture data very quickly and easily, making loan decisions easier

“He’ll try to improve his lifetime mortgages in the same way – by improving either the rate or the LTV – if he sees fit.

“However, what we found is that, because the majority of our clients are in the high net worth market, they typically borrow at reasonably low LTVs and therefore are already getting very high interest rates. .

“We generally don’t find that the prices for the improved products are better than what we would be able to obtain for these customers without medical underwriting.

“I think these deals are more geared towards clients who need to borrow higher amounts at maximum LTVs, which is more often the case in the mainstream market.”

Still, Forsdyke finds that some lenders who don’t particularly advertise medical or zip code underwriting are willing to consider this on a case-by-case basis for Knight Frank’s high-value clients.

He says, “When the loan exceeds a million, more and more lenders are inclined to try and do something for those borrowers. So they can try to tailor the product or offer tailor-made pricing once they’ve bought out the customer and the property. .

“They can come back with a proposition that is not necessarily part of their mainstream product line.”

There is so much data available that lenders can tell a lot about it very quickly, just on the back of the zip code

Victoria Wilson, head of equity release for the Later Life Lending Network, believes the move to personalized pricing is a welcome move for clients and brokers.

Wilson says, “It helps advisors who want to tailor their service and really shell out the options, rather than just moving the business forward as quickly as possible by choosing the best option out of the supply system.

“The more personal the better, especially with everything the Financial Conduct Authority has been talking about recently.

“I think it’s positive for the industry,” Wilson adds.

Postal code pricing, on the other hand, has benefits for lenders by allowing them to carefully manage risk across their portfolio.

The idea of ​​standard pricing will no longer exist. It will be an evolution, as we have seen in the annuity market

Forsdyke explains, “There is so much data available that lenders can tell a lot very quickly, just on the back of the zip code.

“They can look at crime rates, they can look at property values ​​and their historical history, as well as transaction levels.

“They can capture this data very quickly and easily, which makes lending decisions easier. This is where I think Pure is trying to be more dynamic.

Pure Retirement Product Manager Brendan Gilligan says another benefit for borrowers is that pricing is much more granular, rather than rates being bundled into LTV levels where there could be a substantial increase in costs for a borrower who is just outside an LTV band.

He adds, “This encourages responsible borrowing because customers are offered a rate for how much they want to borrow, which means they will hopefully only withdraw what they need. “

The more personal the better, especially with everything the FCA has been talking about recently

Just director of proposals, Sarah Morris-Simpson envisions personalized pricing becoming the norm for the equity release industry.

She says, “I think where we’ll end up is that the idea of ​​standard pricing will no longer exist. It will be an evolution, as we have seen in the annuity market.

Morris-Simpson continues, “In our opinion, whenever you put in place something that is there to last a lifetime for the customer, it should reflect the customer’s life expectancy.

“This is really where we try to get the market moving – to make sure that is factored into every time a mortgage is taken out.”

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