The interest rate will be reduced from 7.35% to 6.99% for business introduced through IFAs and from 7.49% to 7.29% for business direct into Norwich Union.
The new rates mean that, on a like for like basis*, Norwich Union’s rate for IFA introduced business now works out lower than competitors such as Mortgage Express (7.22%), Northern Rock (7.19%) and Legal & General (7.07%)**.
Mark Kelly, director of Norwich Union Personal Finance, says: “We continually review the terms of our product to ensure we give our customers good value products while seeking to manage the issues associated with equity release lending.
In addition to reducing the interest rate, Norwich Union is also now capping the redemption charge on loans redeemed early to 25% of the value of the original loan. Early repayment of loans will also incur an administration fee of £300.
It is important to note that the cap of 25% is an upper limit and that the majority of customers who choose to repay will not incur an early repayment charge. Up to 5 March this year less than a third of Norwich Union customers who have repaid their loan early actually paid an early repayment charge. The average customer charge was £1,650.
Mr Kelly continued, “Equity release plans can provide a solution for elderly people who have no other way of generating a cash lump sum and want to continue to live in their own home. If someone is considering taking out an equity release plan, but planning to redeem early, then it may be that equity release is not the right product for their needs.”
