Equity release companies are boosting bumper profits by charging debtor borrowers hundreds of pounds for small administrative tasks.
According to a Money Mail survey, different lenders have very different paperwork fees. One company charges £ 600 and another does not charge at all. Critics say the claim is unjustified and there is a risk of abuse of customer trust.
If the borrower wants to change the plan, for example, to borrow more money, move the loan to another property, or remove a person from the contract, a fee will be charged.
Stinging Fees: Different equity release lenders will be charged very different fees for paperwork. One company charges £ 600 and another does not charge at all.
The initial public offering decision can only be made after discussing it with an independent advisor, which complicates costs. This can add thousands of pounds to your bill.
The release of shares, also known as a lifetime mortgage, allows homeowners over the age of 55 to borrow cash tied to the value of their property.
However, loans can be expensive and compound interest is usually advanced monthly.
Aviva, the country’s largest creditor, has announced that it will raise a range of fees in the second half of the summer.
Still, Aviva account numbers show that the company’s equity release division made a profit of £ 33.6m last year and a profit of £ 65.7m from commissions and fees.
Equity Releases Legal & General Home Finance brought £ 68m, profited £ 9.6m and Just Group earned £ 236.7m, including revenue from other parts of the business. included.
However, the extra charge imposed by the lender means that if a legal and general homeowner wants to borrow more money from his home, he will be charged a £ 599 “additional borrowing” fee and a £ 322 valuation fee. To do. A home worth £ 350,000. You will also have to pay £ 1,500 for regular advice, for a total of £ 2,421.
Including the advice fee, Aviva borrowers will pay a total of £ 1,675 and More2Life £ 2,260. Still, customers across the country will not pay anything for the same service.
Nationwide, there is no additional borrowing management fee, as it is said that fees will be charged only when costs are incurred.
The lender also does not impose an administration fee, but the borrower must pay for advice and evaluation.
Only 1 in 100 customers switch
Less than one in 100 publicly traded borrowers is switching deals to save thousands of pounds, according to figures revealed by Money Mail.
Earlier this year, we reported how borrowers could save more than £ 30,000 in 10 years by moving to lower interest rates, even after paying exit fees. However, lenders are not obliged to inform their customers that they can save.
This means that tens of thousands of older and vulnerable borrowers can suffer unnecessarily at high interest rates.
According to the Equity Release Council, an industry group, there are currently over 300,000 live equity release mortgages. Aviva has over 100,000 of these.
However, a request from the Financial Conduct Authority (FCA), the city’s oversight body, for the Information Disclosure Act revealed that in 2018, only 121 repayments were made to new lenders. This rose to 772 in 2019 and 1,011 last year.
Current rules do not allow lenders to contact their customers to discuss switching plans, but they can recommend independent reviews and advice.
Patrick Buckingham, 82, from Warwick, was able to switch his £ 100,000 equity release loan from 3.90 percent to 2.27 percent.
He called the broker Responsible Life in March when he read that interest rates had fallen. He plans to save £ 16,800 over the next eight years and £ 37,000 by his 95th birthday.
Patrick says:’I was happy. I’m sure some people are unaware of the savings they are missing.
Equity release lenders are also charging hundreds of pounds to transfer their loans to new real estate.
One family charges the most at £ 695, while Canada Life charges £ 650 and LV = demands £ 595. Again, nationally and just don’t charge anything. Also, the charge to add or remove a name can cost £ 695 for One Family and £ 595 for LV =.
Linda Blackwell, a former mortgage manager at the Financial Conduct Authority, an industry watchdog, said some of the fees were exorbitant.
She states: “When setting rates, do companies need to consider whether they are fair and overkill? Looking at some of these rates, well, the rates speak for themselves.
“They really need to consider whether they are abusing the trust that their customers have placed in the company. Lenders dealing with older and vulnerable customers are already making money from them when these fees are charged. You would expect not to pass.
However, Aviva is currently writing to notify customers that fees will increase from August 10th. For example, the fee for further borrowing jumps from £ 75 to £ 175.
High Cost: A stock release, also known as a lifetime mortgage, allows homeowners over the age of 55 to borrow cash tied to the value of their property.
MoneyMail reader Bob Bevan states that this decision was “morally wrong.” He went public in 2019 with the company and spent additional costs after retirement.
He states: “They are changing the rules after kickoff and that’s not right. They may be eligible, but it’s morally wrong. There’s no reason to justify it, but the equity release borrower. As we are trapped in this.
Baroness (Ros) Altmann says equity release customers were unaware of the true cost of the loan until it was too late.
“Equity release fees are not in the best interests of our customers, and overall equity release fees are usually very high due to very high fees,” she says.
An Aviva spokesman said: “Aviva will review the customer’s fees and ensure that the fees reflect the reasonable cost of managing the requirements associated with a lifetime mortgage.”
A spokesman for LV = said:
A national spokesman said: “All the fees applicable to taking out products are legitimate and related to where society bears the costs.”
The Equity Release Council, a spokesman for the trade association, said:
About Equity Release
Equity Release allows you to use your home to pay for retirement, spend on home renovations, pay for long-term care, and at the same time stay at home.
The main type of equity release product is a lifetime mortgage, which borrows on the value of the home, rolls up interest and leaves debt, and is ultimately paid at the time of death.
A less popular alternative is a home return plan that sells part of the home in a lump sum cash payment.
If you’re considering an equity release, ask about cheaper ways, such as paying interest, use a qualified advisor to assist you in the process, compare the best rates, and pay the fee. Please Confirm.
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Equity release lenders still charge older borrowers huge administrative fees
https://www.dailymail.co.uk/money/equityrelease/article-9761419/Equity-release-lenders-charging-elderly-borrowers-huge-fees.html?ns_mchannel=rss&ns_campaign=1490&ito=1490 Equity release lenders still charge older borrowers huge administrative fees