Norwich Union is launching a new index-linked equity release product, to be available only through IFAs.
Norwich Union is launching a new index-linked equity release product, to be available only through IFAs.
The Index-Linked Cash Release Plan has a minimum age of 55 – the lowest on the market – opening up equity release as an attractive proposition to the pre-retirement market.
The loan-to-value ratios are higher than for previous products, so more cash can be freed up. This has been made possible by the introduction of a new interest rate structure. The interest rate is linked to the retail prices index, and includes the added protection of a maximum rate, currently 10.14 per cent.
Norwich Union has also relaunched its existing fixed-rate Flexible Cash Release Plan with an improved benefits package.
Take-up of equity release has increased more than tenfold over five years1 and the signs are that it is continuing to boom.
But with less than one per cent2 of the estimated Ł400billion2 worth of equity currently held in property by older homeowners currently drawn on for cash or income, there is massive scope for further development of the market.
Daren Carter, head of equity release marketing for Norwich Union, said: “Equity release is a key part of financial planning for retirement, but by introducing a minimum age of 55 for our new product we aim to help IFAs develop the pre-retirement market as well.
“The introduction of the Index Linked Cash Release Plan, together with the improvements to our existing Flexible Cash Release Plan, means we are now offering people a choice according to their needs and preferences.
“Equity release is becoming more and more popular as people understand the benefits it can offer.
“They are realising that it is not a 'last resort' way of raising money, but a valid and effective way of making the most of an asset they have worked for most of their lives to buy – their home.”
And people don’t just use the money to buy luxuries. Around a quarter of equity release customers use their plan as part of wider financial planning such as inheritance tax planning, or arranging future long term care needs – opening up other opportunities for IFAs.
Norwich Union’s new equity release plan offers loan-to-value levels which increase with each year of age – a benefit now also offered by the relaunched Flexible Cash Release Plan which previously had five-year age bands.
There is no maximum property value for either product. There was previously a maximum property value on the cash release plan, which excluded some homeowners in higher value areas from being able to benefit from equity release.
How the money is spent: Norwich Union asked more than 2500 of its equity release customers3 how they spent the money. The results were4:
- Home improvements – 54%
- Investment – 25%
- Holidays – 23%
- New cars – 22%
- Living expenses – 16%
- Pay off debts – 10%
- Gifts – 7%
The Index Linked Cash Release Plan has a minimum interest rate of 4.89 per cent and a maximum interest rate of 10.14 per cent. The actual rate charged will depend on the annual change in the Retail Price Index.
The Flexible Cash Release Plan has a fixed interest rate of 7.79 per cent.
IFA commission for both plans is Ł150 plus 0.5 per cent of the loan amount.
IFAs should contact their Norwich Union consultant for more information or call 0845 302 0111
-ends-
Media contact:
David Ross, Norwich Union Press Office, 08703 66 68 65
1 Safe Home Income Plans (SHIP) 2001
2 Council of Mortgage Lenders 2001
3 2565 Norwich Union equity release customers surveyed in 2001
4 Many people spend the money on more than one of the things listed, so the percentages given total more than 100
Notes to Editors:
- Full written terms and conditions are available on request. Different terms apply for the Flexible Cash Release Plan and the Index Linked Cash Release Plan. Refer to the 'At A Glance' guide for terms and conditions (attached)
- Security will be required. CHECK THAT THIS MORTGAGE WILL MEET YOUR NEEDS IF YOU WANT TO MOVE OR SELL YOUR HOME OR YOU WANT YOUR FAMILY TO INHERIT IT. IF YOU ARE IN DOUBT SEEK INDEPENDENT ADVICE.
- Norwich Union is the UK’s largest insurer. It is the UK’s largest provider of life, pensions and investment products and one of the leading IFA providers. IFAs provide around 75% of the company’s long-term savings business.
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