Can the Halifax Retirement Home Plan Still Offer Equity Release to its Customers?September 25th, 2013
The Halifax Retirement Home Plan was pulled out of the market in August 2011, much to the disappointment of many prospective clients. Even now people are still looking for the Retirement Home Plan, due to the fact it had been earmarked as their retirement mortgage tool of choice. Unfortunately, a considerable number of new retirees have now reached their hour of need and find this form of Halifax equity release scheme is no more.
Halifax’s decision could have been taken owing to several factors. For one, Halifax may have been unable to cope with the growing demand for the interest only home equity type of plans. This advanced decision in lieu of the recent FSA ruling on interest only mortgages has proven hindsight on their behalf. Eventually, the Halifax interest only mortgage was becoming a too popular alternative to standard equity release schemes. The sheer volume of applicants was so high that Halifax was simply not able to cope with this demand and their service standards towards the end of its reign had become strained.
The reason for this popularity was that the Halifax Retirement Home Plan was an interest only lifetime mortgage product. Nothing similar existed at that time. This meant that unlike many other equity release schemes, the interest did not compound, and as long as the monthly payments were maintained then the balance remained level throughout. Unlike the roll-up equity release mortgages, Halifax Retirement mortgages proved to be a good solution for those wishing to release equity in retirement and at the same time, leave behind an inheritance.
The reasons for Halifax withdrawing this product were many, but the fact remains that the demand for borrowing solutions during retirement is ever increasing in these difficult times. The Halifax plan and its withdrawal left a huge gap in the retirement mortgage market. The short answer to whether Halifax still offers interest only lifetime mortgages to pensioners is, no. The Halifax range of interest mortgages are now offered only under their standard mortgage schemes and must be repaid by the age of 75. Additionally, to support the mortgage, affordability will need to be verified and income needs to be sufficient to cover the amount borrowed.
If you did manage to get on to the Retirement Home Plan scheme before August 2011, you are one of the lucky ones, and you will be able to continue using it. Existing customers will also be able to port the Halifax Retirement Home Plan whenever moving home. Additionally, they can apply for a further advance in the future should the need arise and affordability can continue be shown to support the borrowings.
However, the interest rates, especially for additional borrowing, are much higher than when the original application was submitted. At inception the Halifax interest only lifetime mortgage plan adopted the residential mortgage rates tariff and consequently had entitlement to the whole of Halifax’s product range. Unfortunately, this does not apply to subsequent borrowings or whenever the initial fixed rate or tracker deal has expired.
While expired rates are currently renewed at around 3-4%, interest rates for further advances are currently up to around 5-6%. So the rates are not nearly as competitive as they were at the outset of the scheme.
The Halifax Retirement Home Plan as an interest only lifetime mortgage aimed at pensioners proved to be immensely successful as it addressed a real and existing need in the market. For those that already are sitting pretty on this scheme it would be advisable to always maintain this, unless there is definitely no possibility of ever needing funds in retirement again. Once the Halifax Retirement Home Plan has been repaid, there is no going back and the plan will then be lost forever. Therefore, for those downsizing or considering full repayment early, consider whether it maybe worthwhile just keeping a small balance outstanding to keep the plan alive & of possible use still in the future.
For those trying to borrow should consider remaining in situ as in these are times of great economic difficulty, and a shortage of new interest only lifetime mortgage, their existing Halifax Retirement mortgage scheme can still prove to be a useful financial tool for pensioners.
To speak to a local independent mortgage adviser, qualified to make recommendations on the Halifax Retirement Home Plan call 0800 678 5159 today.