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Defaqto on Partnership Enhanced Lifetime Mortgage

View of Defaqto insight analyst for banking David Black

Black says: “Partnership specialises in providing financial solutions for those with health or lifestyle conditions and its latest offering is a lifetime mortgage for that sector. It offers enhanced terms to smokers and those who suffer from long term illnesses such as diabetes, cancer or high blood pressure.

“It is always good to see increased competition and Partnership has joined Hodge Lifetime and more2life in offering lifetime mortgages addressing the needs of the impaired life market. The benefit of this is that such products can take account of the shorter life expectancy by offering a larger lump sum than for someone who is likely to live longer. Partnership’s research has found that up to 40 per cent of all those who qualify for equity release could benefit from declaring health issues.

“As a member of SHIP, Partnership’s new lifetime mortgage comes equipped with the requisite ‘no negative equity guarantee’ which provides considerable comfort to the borrower while entailing considerable potential cost to the provider. It also permits the borrower to protect a percentage of the property value to leave to heirs. Seven other lifetime mortgages offer this protected equity feature for inheritance.

“It has become commonplace to see big application or arrangement fees in the residential mortgage market, but the majority of lifetime mortgages have either no arrangement fee or a relatively small fee. Six lifetime mortgages have no fee while all the remainder have a fee in the extremely narrow band of between £500 and £699. Partnership is one of these six that does not charge a fee.

“Partly because of the no negative equity guarantee, it is to be expected that lifetime mortgages charge a higher interest rate than their nearest counterparts in the mainstream residential mortgage market – the long-term fixed rate mortgage.  There is a noticeable lack of long-term fixed rate residential mortgages – there are only five with fixed rate periods of 10 years or more – the average interest rate that they currently charge is 5.29 per cent.

“Partnership’s interest rate of 7.65 per cent is also somewhat higher than the average rate charged by its peers in the lifetime mortgage market – currently at 7.15 per cent. But, as we’ve seen, Partnership is one of the few that does not charge a fee. At its interest rate of 7.65 per cent, the amount of the outstanding mortgage will double every nine years five months.”

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