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Pru’s lifetime loan aiming to address safety concerns

Prudential is ready to launch its lifetime mortgage product this autumn, focusing on a flexible loan facility allowing customers to draw down more cash the older they get.

Addressing concerns raised by the FSA in May, Pru’s Property Value Release Plan restricts customers to drawing down equity in manageable chunks, Money Marketing understands.

It is designed to stop the situation where customers release more cash than required, then have to invest the surplus in investment products that potentially return less than the interest charged.

Two options will be available. The first allows a maximum loan to value of 15 per cent at age 60, increasing by 1 per cent of the property value every year up to 35 per cent LTV. This increase is guaranteed.

The increasing loan facility is based on the original property price, so there is no need for revaluation or a new application.

The second option is to borrow a fixed sum dependent on age, starting at 20 per cent LTV at 60, rising to a maximum of 35 per cent at 75. The customer can draw down money at any time throughout their retirement. The fixed pay rate will be confirmed closer to launch.

MM revealed in May that Pru was intending to sever its relationship with Northern Rock and launch into equity release on its own. The product is being introduced under the guidance of director of lifetime mortgages Ali Crossley.

A spokesman says: “Details are being sent out to intermediaries and brokers. We cannot confirm details until later in the year when the product is launched.”

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