The mortgage allows the client to protect a proportion of the eventual sale value of a property while releasing the rest of the equity. If there is insufficient equity to repay the loan the shortfall is met by Northern Rock’s “no negative equity guarantee.”
The product has a higher rate then other equity release products, costing between 6.99 per cent and 7.66 per cent dependent on the amount borrowed, to compensate for the extra risk taken by the lender.
Ray Boulger, senior technical manager at Charcoal, said: “This could sound the death knell for home reversion plan as it offers a very similar service but within a regulated framework.”
Dean Mirfin, business development manager at specialist equity release brokerage Key Retirement Solutions, praised the new Northern Rock product. He said: “Our advisors were very impressed with the innovation of the product, it is the first of its kind in the market.”
He went on to say that while the product was not suitable for everyone, “brokers will have to explain why they are not using it, if it can raise the required sum and the client has an interest in preserving equity for inheritance.”
Anthony Mooney, assistant director Northern Rock, said: “Our product offers an added degree of protection that is not available from other lenders and helps move the lifetime mortgage market forward.”
