Lifetime loan provider Spry Finance has cut its fixed interest rate, extending the reduction to existing customers amid better than expected loan volumes.
The company, which is a retail division of Seniors Money Mortgages, resumed lending in January. It said it has handled thousands of inquiries in the past few months.
Interest rates have been cut from 5.5 per cent to 4.95 per cent effective from July 1st. The company is also extending the lower rate to customers who have taken out loans with Spry since January, as a gesture to its first customers.
Director of Spry Finance John Moriarty said the company had anticipated a level of pent-up demand but wasn't sure what to expect.
“The first six months of operations have been busier than expected and we already have a pipeline of almost €60 million in loan inquiries, which is higher than we had envisaged especially given that this has happened in the teeth of the Covid pandemic,” he said.
“We’re delighted with the response and the traction we have gained. The positive uptake has enabled us to refine our funding model as we look beyond the pilot stage and put in place the new reduced interest rate.”
Lifetime loans allow older homeowners to borrow against value in their property without the need to sell it, trade down, or make monthly repayments. The interest rate is fixed for life, with the amount homeowners can borrow depending on their age and the value of the house.
Interest is added to the loan balance and the loan is repaid after the borrower dies or moves out of the property. The loans can be used for a range of purposes, including home improvements to make houses more comfortable and energy efficient, paying off a mortgage balance or other debts to free up monthly cash flow, and reasonable lifestyle expenses.
“Today’s clients also bring their own more sophisticated approach to the decision process, with many being referred to us by their accountant or professional financial adviser. The family home remains the single biggest asset most of this age group have, and there is general awareness that a lifetime loan enables them to release some of the value tied up in it, but they remember the lessons of the financial crisis and are consistently disciplined in working through if they should or should not take out a loan, what exactly their needs are and how much it makes sense to borrow,” Mr Moriarty said.
Research conducted by Spry Finance by market research agency Behaviour & Attitudes before the company launched its products indicated that over-60s wanted to remain in their own homes and retain full ownership of it.
“Feedback from this year’s applicants would suggest that this age cohort have little interest in down-sizing for various reasons and strongly prefer to ‘age in place’, preferably in comfort, hence the decision to apply for the loan,” Mr Moriarty said.
The news comes as a company trading as Home Plus is planning to launch a home-reversion product for the first time in the Irish market since the financial crash.
This is where older people can sell a stake in their home in exchange for a lump sum or monthly payment and a lifelong right of residence.
Unlike equity-release loans, where the customer retains ownership of the home in exchange for a mortgage with rolled-up interest that must be settled, typically by way of a sale after the death of the borrower, home reversion involves the sale of a stake in a home.
However, this is usually for a much lower figure than its current market value.