Equity release lender More 2 Life is cutting application fees by 48 per cent on in its Interest Choice Plan three months after it was launched.
Fees on the plan, which was designed in response to demand from equity release customers who are still working or need to clear interest-only mortgages, have been cut to £155 from £300 for customers with homes valued between £100,000 and £150,000.
More 2 Life’s research shows up to 103,000 over-65s are still paying mortgages, spending around £1.36 billion a year. That breaks down to around 81,000 households in the 65-74 age group and 22,000 in over-75 age groups
And it forecasts the issue is likely to become a bigger problem as more homeowners with interest-only mortgages come to the end of their term – the Council of Mortgage Lenders estimates 150,000 interest-only loans will mature each year until 2020.
Application fees now range from £120 on homes worth less than £100,000 to £820 on homes worth between £800,000 and £900,000 compared with £200 and £900 previously.
The Plan allows customers to choose the level of interest they pay on loans and the term while fixing their interest rate and having access to a lifetime drawdown facility. Funding for the plan has come from Just Retirement.
Jon King, Managing Director of More 2 Life, said: “The cuts in application fees are in direct response to the strong early demand.
““The Interest Choice Plan is expanding the market by improving on previous plans which offered interest-paying options and offering increased flexibility on access to further funds.”
Customers can choose to pay all or part of the monthly interest on their loan and choose how much to withdraw. Those who do not take the whole loan-to-value can make further withdrawals.
The interest rate of 6.08 per cent monthly is fixed for life and interest payments are subject to a £25 minimum. Clients do not have to choose a term to pay the interest and can stop free of charge at any time. On further withdrawals rates are fixed on the rate applicable then.
Loan to values start from 20 per cent at age 60 rising to 36 per cent at age 75 and the maximum is 45 per cent at age 85-plus.
The minimum initial lump sum is £10,000 and the minimum facility including drawdown is £15,000 with the minimum drawdown facility set at £5,000. Minimum property values are £70,000. The arrangement fee is £695.
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