Pru also announced it will be charging a fixed interest rate of 6.45% (the AER for comparison is 6.64% and the APR is 6.9%). It says this rate can prove competitive against single lump sum providers offering a lower rate, because the client may be able to save interest by taking the loan in stages rather than all in one go.
Example for the Pru
For a couple both aged 67 with a £250,000 property, the maximum loan to value is £67,500. If the couple decide to take this up front with a provider charging 5.99% interest over an 18-year term, the outstanding balance, at the age of 85 is £192,341, with the interest at £124,841. If the couple decide to take a lump sum up front with a provider charging 6.3% interest, the outstanding balance is £202,723 and the interest is £135,223. If however, they choose to use the Pru’s flexible product and take £27,500 up front, and then 4 drawdowns of £10,000 every four years, the outstanding balance is 153,270 and the interest is 85,770. Therefore in this circumstance, by using a flexible product, the couple save £39,071 on the 5.99% product and £49,453 on the 6.3% product.
From late September an online calculator will be available on the Pruadviser website. This will allow customers and advisers to see the potential benefits of flexible drawdown as opposed to a single lump sum. In many instances, even where the headline interest rate is higher, by using the flexible drawdown facility the Pru says customers may be able to save considerable amounts of interest.
As a special offer to mark the launch, customers who submit application forms before 31 March 2006 will not pay the valuation fee – a saving of approximately £206-£529 depending on the value of the property. Commission to advisers will be £400 or 1% of the initial loan advanced (whichever is the greater).
The mortgage applications will be handled by Global Home Loans (GHL). The Pru has a team at GHL with access to case tracking technology, which sends automatic updates to advisers to ensure speedy service.
Ali Crossley, Pru’s Director of Lifetime Mortgages, said: “We have been working extremely hard to bring this product to market and are delighted to announce the launch of the key facts illustrations quotation system today.
“The lifetime mortgage market has been in need of a shake up for some time – and we’ve delivered. When we first announced the details of our flexible and innovative product, we met a very positive reaction from customers, advisers and even competitors.4 We expect the level of interest from advisers over the coming weeks to reflect this.”
A specialist team has been set up in Intermediaries to manage relationships with financial advisers and develop sales. Jan Holt, who recently joined Pru from Norwich Union, will lead the specialist team.
