“If you allowed say 10 payments a year of up to X per month that would create a solution where you wouldn't have to calculate affordability.”
The equity release sector could avoid being subject to affordability stress tests on drawdown products by classing payments as optional overpayments, managing director of Key Partnerships Will Hale has suggested.
He compared the idea to allowing 10% overpayments with residential mortgages.
Hale said: “If you allowed say 10 payments a year of up to X per month that would create a solution where you wouldn't have to calculate affordability.”
Hale also talked rate. Currently the cheapest in the market is 4.88% offered by Legal & General but if the right type of funding hits the market he could foresee it dropping to 4.50%.
And with Equity Release Council chairman Nigel Waterson becoming more publicly open about dropping equity release protections such as a no negative equity guarantee Hale said they could drop even lower.
Hale added: “If we see funding outside of life companies from asset management firms with defined benefit pension schemes for example a rate of 4.50% is not beyond the realms of possibility.
“If we see a relaxation in protections we could see a sub 4% rate in place.
“We would still have classic equity release products but there would also be a middle ground without all the protections with lower rates.”
Key Retirement is ramping up recruitment this year by adding between 30 and 40 advisers to bring the total to 150.
