Norwich Union has conceded that there could be a problem with its lifetime mortgage and says it will be looking into the issue of rate changes between application and completion.
Last week, NU met Mortgage Portfolio Services principal Simon Chalk to discuss issues raised over the product's mark-to-market early redemption penalties and the fact that the rate a consumer applies for could be different to the one they get on completion.
Chalk, who last month wrote to the Mortgage Code Compliance Board complaining about the product, says NU did not back down over the early redemption penalty, arguing that while it is complicated, it remains the best way of balancing the risk to shareholders with fairness to the client.
However, head of marketing Paul Stokes said he had not appreciated how a possible rate change between application and completion could affect an intermediary sitting in front of a client and told Chalk that he would raise the issue at NU's next development meeting.
Standard Life Bank is considering removing the same feature from its lifetime mortgage. As things stand, SLB says it will honour whichever rate is the lowest, whether this is on application or completion.
Chalk says: “Paul said he would look at this issue at NU's development meeting and see if there is any way of improving it. It was not a commitment but it is still a move in the right direction.”
Stokes says: “The meeting helped me to understand things from a broker's perspective. I cannot give timescales but we are looking into the implications of this issue to see what it means for us.”