Equity Release - interest is accruing at 6.5% fixed rate since 2003. Help!

Richatrd92024

My parents took out an $80,000 lifetime equity release mortgage on their home in 2003 at a fixed rate of 6.5%

My father died some years ago, and my 98 year old mother still lives in the bungalow.

The £80,000 has now grown to £210,000, and the home is worth about £300,000.

I have only just discovered that we could have switched to another lender at a reduced rate. Damn!

Do you think it's best to shop around now for a lower rate... or try to negotiate with the lender (Newcastle Building Society)?

Charging 6.5% all these years feels totally unjust. Do we have any recourse to get the loan lowered?

Thank you very much for any advice.

LadyGnome

I don't think any of us can give you specific advice.  However, the FCA has started looking into Equity Release and the quality of advice offered.
https://www.fca.org.uk/publications/multi-firm-reviews/equity-release-sales-and-advice-process-key-findings

The questions I would be asking would be:-
Was the product suitable for their needs?
Were alternatives offered?
Was it clear that the rate was fixed and would not be adjusted even if interest rates fell?
Was it clear that they could move to another lender?

I would see what original paperwork exists and then depending on what you find start asking questions to the Lender.  You would need to work through their complaints process before you could go to the Financial Ombudsman.

You have nothing to lose by asking some awkward questions - the worst that can happen is that nothing changes.

tacpot12

6.5% might feels totally unjust, but if you look at the Bank of England Base rate, it's only 4.5% above the average base rate over the  period, and mortgage rates are usally about 2% above the base rate, so it's only about 2.5% above a standard mortgage. Given that the lender doesn't have any certainty about how long it will be before they get their money back, I feel it is a very reasonable rate.

Richatrd92024

tacpot12 said:

6.5% might feels totally unjust, but if you look at the Bank of England Base rate, it's only 4.5% above the average base rate over the  period, and mortgage rates are usally about 2% above the base rate, so it's only about 2.5% above a standard mortgage. Given that the lender doesn't have any certainty about how long it will be before they get their money back, I feel it is a very reasonable rate.

Thank you, yes, I hear you.

I haven't kept tabs on the interest rate over the last 18 years (since the loan was taken out), but I thought it was really low, closer to 1% for many years.

TheMilkmansDad

for reference base rate was around 3.75% in 2003

https://www.bankofengland.co.uk/boeapps/database/Bank-Rate.asp

ahh i remember those days when you could get decent savings rates!

Richatrd92024

TheMilkmansDad said:

for reference base rate was around 3.75% in 2003

ahh i remember those days when you could get decent savings rates!

Thanks, very helpful.

I'm even old enough to remember the days of 14.88% !

October '89.

Thatcher versus Lawson, and a whole load of us got well and truly shafted. Oh well, the ups and downs of life...

AdrianC

Richatrd92024 said:

My parents took out an $80,000 lifetime equity release mortgage on their home in 2003 at a fixed rate of 6.5%

My father died some years ago, and my 98 year old mother still lives in the bungalow.

The £80,000 has now grown to £210,000, and the home is worth about £300,000.

I have only just discovered that we could have switched to another lender at a reduced rate. Damn!

Do you think it's best to shop around now for a lower rate... or try to negotiate with the lender (Newcastle Building Society)?

Charging 6.5% all these years feels totally unjust. Do we have any recourse to get the loan lowered?

It was a rate that your parents felt appropriate when they took the loan out, and did not feel the need to refinance since.

Your mother was 80 at the time. I presume she was in good health and had full capacity? Could she have enjoyed the life she has done over the last 18 years without that equity?

Is looking into this now about maximising your mother's welfare, or your inheritance?
Do you have PoA over her finances?

teachfast

AdrianC said:

Richatrd92024 said:

My parents took out an $80,000 lifetime equity release mortgage on their home in 2003 at a fixed rate of 6.5%

My father died some years ago, and my 98 year old mother still lives in the bungalow.

The £80,000 has now grown to £210,000, and the home is worth about £300,000.

I have only just discovered that we could have switched to another lender at a reduced rate. Damn!

Do you think it's best to shop around now for a lower rate... or try to negotiate with the lender (Newcastle Building Society)?

Charging 6.5% all these years feels totally unjust. Do we have any recourse to get the loan lowered?

It was a rate that your parents felt appropriate when they took the loan out, and did not feel the need to refinance since.

Your mother was 80 at the time. I presume she was in good health and had full capacity? Could she have enjoyed the life she has done over the last 18 years without that equity?

Is looking into this now about maximising your mother's welfare, or your inheritance?
Do you have PoA over her finances?

Does it matter which? Both are valid.