Northern Rock turns its back on equity release

Published 07th Oct 2009

Northern Rock, the Government owned mortgage lender, is to stop offering equity release mortgages, claiming low customer demand.

However, Britain's largest equity release adviser says it has seen an increase in demand over the past few months.

Equity release is a way for elderly people to get at some of the cash tied up in their home without having to move. Usually this is done with a lifetime mortgage, which does not have to be repaid until the homeowner dies or goes into residential care.

Northern Rock had been one of the largest providers of lifetime mortgages. But after it came under Government control it stopped selling through brokers and advisers and concentrated on direct sales.

Only about 30 per cent of equity release plans are sold direct - and mainly by the two largest providers, Aviva and Prudential - compared with more than 75 per cent five years ago, so the potential market was too narrow.

Northern Rock says current applications will be processed and there will be no change to existing lifetime mortgages.

In the past few months, other equity release providers, including Newcastle, Coventry and Saffron building societies, have pulled out of the market.

'We've seen demand increase by 15 per cent over the past three months compared to the previous three and, year on year, we're only down 15 per cent,' says Dean Mirfin, marketing director of advisers Key Retirement Solutions.

Aviva, Pru and LV= all offer a rate of 6.4 per cent on their equity release mortgages.

Source: ' Daily Mail '

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