more2life has added a new Interest Reward feature to its Flexi lifetime mortgage which offers personalised interest rates based on live pricing.
Coupled with the ability to make payments, the product can significantly reduce the client’s cost of borrowing over the loan term. While advisers are expected to assess affordability for the product, it’s not based on the client’s credit score and the home won’t be repossessed if they stop making payments early.
The interest rate discount available to each Flexi Interest Reward client is bespoke, with a personalised payment schedule based on how much they want to pay and for how long, and is in place for life as long as all payments are made. At time of launch, rate discounts typically range between 0.05-0.75%.
Clients can choose to pay more than 100% of the plan’s monthly interest and typically would receive a bigger interest rate discount for doing so.
Clients can also – in addition to the agreed monthly payments – choose to make overpayments to help further reduce the cost of the borrowing; monthly payments and overpayments combined are allowed up to 10% of the initial loan amount each year during the early repayment charge period.
Available to clients aged between 55 and 82 plus 364 days, Flexi Interest Reward comes with a maximum LTV of 48%, has an ERC period of 15 years, and meets the Equity Release Council standards for lifetime mortgage products.
This means the client has security of tenure for life, they will never owe more than their home’s value, and they will always know their rate, which is fixed for the entirety of the plan providing they make all payments.
Flexi Interest Reward also contains a new approach to those borrowers who miss payments. If the account goes no more than three months into arrears during the contractual payment term, the client can retain the full Interest Reward discount if they make up the payment shortfall within three months.
If the client loses the Interest Reward discount due to missed payments, they won’t lose the full discount if they’ve already paid over 25% of their pre-agreed amount. Instead, payments made, including voluntary overpayments, will be considered so only a portion of the discount may be removed.
Dave Harris, CEO of more2life, said: “We continue to look at the ways and means by which we can offer bespoke, personalised solutions to lifetime mortgage customers, not least so they have full control over the payments they make and certainty on the discounts they receive, allowing them to manage their finances much more effectively.
“Flexi Interest Reward does all this, and then some, allowing the adviser to assess affordability and – in a first for this sector – allows them to secure personalised pricing at that moment in time, in order to ensure we can provide as competitive a rate as possible.
“This is all about ensuring the client is in the strongest possible position and benefiting fully from their ability to make payments, while also having full transparency about what rate they will pay for the life of the mortgage, plus allowing further overpayments and, if necessary, a period where they might not make payments at all but will still be able to benefit from a rate discount.
“Advisers have the opportunity to make their affordability assessment, in order to weigh up Flexi Interest Reward against all other available later life lending options, and we can then ensure clients are getting the most suitable, positive product solution for their needs from right across the market.
“With this product clients are also benefiting from other aspects of the lifetime mortgage such as security of tenure, never owing more than the property’s value and also being able to plan ahead more effectively.
“We believe this marks another step forward, not just in terms of specific lifetime mortgage product provision and innovation, but also in terms of later life lending as a whole. It rewards clients for payments with rate discounts and excellent ‘moment in time’ pricing, offers further opportunities to keep the cost of the loan down based on affordability, allows them to secure the finance they need, and gives them security and certainty for the long-term.
“Everything we believe older homeowners and their advisers are seeking in this market. We’re looking forward to working with all stakeholders to firmly establish Flexi Interest Reward within the later life lending space.”
