The equity release industry largely consists of lenders who are insurance companies, but there are very few Banks. Many people often ask me if they should go directly to their Bank and why I haven't recommended a product offered by them. So, which Banks offer equity release?
Lloyds Banking Group and Nationwide building society offer equity release, but no other banks do. The Lloyds Banking Group includes Halifax, Bank of Scotland and Scottish Widows. Scottish Widdows services all brands within Lloyds Banking Group. In contrast, Nationwide lends another funder's money rather than its own.
So why are there so few high-street Banks providing equity release? And is it worth going directly to your Bank to ask for an equity release? Let's explore these questions and more.
There is no specific Bank that offers the best equity release, as the best plan will depend on the individual's needs and circumstances. This includes your property value, construction and features, the required equity release amount and your goals, which your equity release advisor will assess.
There is little competition at the moment, with only the Lloyds Banking Group and Nationwide building society currently offering plans. While I appreciate Nationwide technically is not a Bank, they act similarly and are a high-street lender you may have heard of.
Let's start by taking a look at Lloyds Banking Group.
What companies are in the Lloyds Banking Group?
The Lloyds Banking Group includes:
- Bank of Scotland
- Scottish Widows
Scottish Widows is the insurance arm of Lloyds Banking Group.
The other Banks refer all their customers to Scottish Widows for their equity release enquiries.
Is the Scottish Widows' equity release product good?
Scottish Widows provide competitive interest rates, but their property and personal criteria are one of, if not the strictest, on the equity release market.
If you go directly to one of the Banks within the Lloyds Banking Group, they will refer you to a Scottish Widows equity release advisor.
The advisor will only recommend Scottish Widows' plans and will not discuss any other lenders product, even if it is more suitable and cost-effective. We refer to this as "tied" advice, which is restrictive and can often result in a worse outcome for you.
Here at Money Release, we offer unrestricted access to the equity release lenders and products. We refer to this as "whole of market" advice.
Like Scottish Widows, Nationwide only provides tied advice, but you aren't a Nationwide customer after receiving the money.
Who provides Nationwide's equity release?
Rothesay Life funds Nationwide's equity release plan, and once Nationwide has set up your plan, Pure Retirement will service you. Pure Retirement is one of the largest equity release lenders in the market.
The benefits of the Nationwide equity release:
- Free equity release advice
- £1,000 non-interest-bearing cashback - which can be used to pay for legal work
The downside of the Nationwide equity release:
- Tied advice - other lenders' products could be cheaper
- Increased interest rate - we can access the Rothesay-funded product at a lower interest rate
If you are considering a Nationwide Equity Release plan, contact us on 0207 158 0881 to get a lower interest rate plan.
After Nationwide has arranged your equity release, Pure Retirement will provide your customer service, and Nationwide will not be involved.
Again, the property and personal criteria are one of the strictest in the equity release market. So although they may advise you that equity release isn't possible for you, it might be from a whole of market advice firm like ourselves.
If you have been refused equity release in the past from a tied advice firm, contact us on 0207 158 0881 for a free no-obligation consultation from one of our whole of market advisers.
Why don't more high street Banks offer equity release?
Equity release lenders are primarily comprised of insurance companies, who use their annuity funds to invest in the property market via equity release.
They believe the property market will continue to grow in the medium to long term, returning their investment while using their client's funds.
However, Banks typically do not have the means to fund their equity release ventures due to the nature of their business.
They cannot use their customers' current accounts or savings as these funds are typically offset by other products.
Furthermore, although the Financial Conduct Authority (FCA) regulates Banks, they are also regulated by Prudential Regulation Authority (PRA). The PRA set strict guidelines on how much of their "books" can be assigned to different assets.
So, even if Banks wanted to enter the equity release market, they would struggle to use their own funds based on regulation.
Can I get an equity release through my Bank?
You may be able to get equity release through your Bank, but only if you Bank with the Lloyds Banking Group or Nationwide building society.
Most Banks, such as Santander, HSBC and NatWest, do not offer equity release.
Instead, they will refer you to an equity release adviser with whom they have a business agreement.
Remember: Banks that refer you to another firm will not be involved in your equity release. The referred firm may have restricted access to lenders and products, known as tied advice.
Instead of speaking with your Bank, consider a specialist equity release company.
Which equity release lenders will I know?
Although there are few high street Banks in the equity release market, many household name insurance companies exist, including:
- LV= (Liverpool Victoria)
- Legal & General
- Standard Life
- Canada Life
Although household names, not all of these companies use their own funds. Many will have funders backing their products.
||Do they lend their own money?
||Who is the funder?
|Legal & General
||Legal & General
||Stone Haven + Canada Life
Other specialist equity release lenders
Although not household names, some lenders solely specialise in equity release, which includes:
- Pure Retirement
- Just Retirement
- One Family
More2Life is the largest equity release lender, with over £3 billion in loans via equity release currently outstanding. As they are the biggest equity release company, they have six funders behind them. One for each of their product lines!
So, let's see who funds the specialist companies.
||Do they lend their own money?
||Who is the funder?
||Multiple (including Rothesay, Phoenix, Just)
||Multiple (including Rothesay)
Can I trust equity release lenders I haven't heard of?
You can trust all equity release lenders, who are approved and regulated by the Financial Conduct Authority (FCA), and are members of the Equity Release Council.
Lenders who are members of the Equity Release Council afford you additional protections through their SHIP (Safe Home Income Plans) Standards:
- For lifetime mortgages the rate must be fixed for each release or, if variable, the rate must be capped for the life of the loan.
- You must have the right to remain in your property for life or until you need to move into long-term care, provided the property remains your main residence and you abide by the terms and conditions of your contract.
- You have the right to move to another property subject to the new property being acceptable to your product provider as continuing security for your equity release loan.
- The product must have a “no negative equity guarantee”. This means that when your property is sold, and agents’ and solicitors’ fees have been paid, even if the amount left is not enough to repay the outstanding loan to your provider, neither you nor your estate will be liable to pay any more.
- All customers taking out new plans which meet the Equity Release Council standards must have the right to make penalty free payments, subject to lending criteria.
While we consider the whole equity release market, we also understand some people's preference for a brand they know and trust. If you have a preferred brand, discuss this with your equity release advisor.
If you have further questions, why not speak with one of our qualified advisors?
Call us on 0207 158 0881 or use our online form to book your FREE consultation.
While a qualified equity release advisor has written this guide, it is not intended to be used as financial nor legal advice and should not be relied upon.
To understand the full features and risks of an Equity Release plan, ask for a personalised illustration.
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