Article date: 21 January 2002
Norwich Union is launching a new index-linked equity releaseproduct, 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 releaseas 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 theintroduction of a new interest rate structure. The interest rate islinked to the retail prices index, and includes the addedprotection of a maximum rate, currently 10.14 per cent.
Norwich Union has also relaunched its existing fixed-rateFlexible Cash Release Plan with an improved benefits package.
Take-up of equity release has increased more than tenfold overfive years1 and the signs are that it is continuing toboom.
But with less than one per cent2 of the estimated£400billion2 worth of equity currently held in propertyby older homeowners currently drawn on for cash or income, there ismassive scope for further development of the market.
Daren Carter, head of equity release marketing for NorwichUnion, said: “Equity release is a key part of financialplanning for retirement, but by introducing a minimum age of 55 forour new product we aim to help IFAs develop the pre-retirementmarket as well.
“The introduction of the Index Linked Cash Release Plan,together with the improvements to our existing Flexible CashRelease Plan, means we are now offering people a choice accordingto their needs and preferences.
“Equity release is becoming more and more popular aspeople understand the benefits it can offer.
“They are realising that it is not a 'last resort' way ofraising money, but a valid and effective way of making the most ofan 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 partof wider financial planning such as inheritance tax planning, orarranging future long term care needs – opening up otheropportunities for IFAs.
Norwich Union’s new equity release plan offersloan-to-value levels which increase with each year of age – abenefit now also offered by the relaunched Flexible Cash ReleasePlan which previously had five-year age bands.
There is no maximum property value for either product. There waspreviously a maximum property value on the cash release plan, whichexcluded some homeowners in higher value areas from being able tobenefit from equity release.
How the money is spent: Norwich Union asked more than2500 of its equity release customers3 how they spent themoney. 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 rateof 4.89 per cent and a maximum interest rate of 10.14 per cent. Theactual rate charged will depend on the annual change in the RetailPrice Index.
The Flexible Cash Release Plan has a fixed interest rate of 7.79per cent.
IFA commission for both plans is £150 plus 0.5 per cent of theloan amount.
IFAs should contact their Norwich Union consultant for moreinformation or call 0845 302 0111
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 surveyedin 2001
4 Many people spend the money on more than one of thethings 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 theIndex Linked Cash Release Plan. Refer to the 'At A Glance' guidefor terms and conditions (attached)
- Security will be required. CHECK THAT THIS MORTGAGE WILL MEETYOUR NEEDS IF YOU WANT TO MOVE OR SELL YOUR HOME OR YOU WANT YOURFAMILY TO INHERIT IT. IF YOU ARE IN DOUBT SEEK INDEPENDENTADVICE.
- Norwich Union is the UK’s largest insurer. It is theUK’s largest provider of life, pensions and investmentproducts and one of the leading IFA providers. IFAs provide around75% of the company’s long-term savings business.
- Norwich Union has strategic alliances with over 20 buildingsocieties and other leading UK brand names including TescoPersonal Finance and The Royal Bank of Scotland Group.
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