Historic Aviva lifetime mortgage – could a 2015 drawdown be a separate actionable event?

miltwin

In September 2015 my parents took a further £13,200 from an Aviva lifetime-mortgage reserve. Aviva issued a fresh statement, applied a new fixed interest rate, showed the then-current balance and produced a new projection of the future debt. Could that 2015 release be treated as a separate actionable act/omission for Limitation Act purposes, rather than merely part of the original 2010 advice?

The original 2010 advice is now beyond the 15-year longstop. The 2015 release is not. I’d be particularly interested in any precedent, ombudsman/court reasoning, or industry experience on whether reserve drawdowns can be treated as distinct events.

Background, briefly:

• Original lifetime mortgage arranged in 2010.
• Total borrowing across the initial advance and later drawdowns: £43,200.
• Current balance: about £109,000.
• Later reserve releases: £10,000 in 2011, £5,000 in 2013, £13,200 in 2015.
• The 2010 adviser identified a conventional interest-only mortgage as cheaper and apparently affordable, but recommended the lifetime mortgage because my parents did not want monthly repayments.
• £4,000 of the initial borrowing was taken simply to sit in an instant-access savings account as an emergency fund, despite the borrowing attracting roughly 7% compound interest.
• The reserve facility was sold as allowing later borrowing without needing to reapply.
• My mother already had Parkinson’s disease, but the 2010 fact-find records both clients as being in good health.
• The adviser was recorded as holding CF30 status. Aviva has since stated that CF30 alone would not have been sufficient to establish competence to advise on equity release, but says it has checked its remaining records and is satisfied that the adviser was appropriately qualified and authorised. It has not identified the specific equity-release qualification held.

I’ve already gone through Aviva, FOS, the FCA, my MP - who has written to Aviva - and a solicitor. FOS did not reach the merits/issues because of time limits, and the solicitor considered the overall litigation prospects too weak given the age of the case and the surviving paperwork.

I’ve also now asked the Equity Release Council whether they can look at compliance with the historic SHIP standards.

I’m not looking for general views on whether equity release is good or bad. I accept that the paperwork did disclose compound interest and estate erosion.

I’m specifically trying to establish whether the 2015 drawdown creates a distinct limitation point, and whether there is any realistic route based on that later transaction or on historic SHIP/compliance standards.

Particularly interested to hear from ex-IFAs, mortgage compliance people, equity-release advisers, or anyone who has taken an old equity-release complaint beyond FOS.

I’m happy to provide the full documents, suitably redacted, to anyone with relevant experience who is willing to take a deeper look privately, either offline or via MSE PM.

Thanks for any help and advice.

poseidon1

Good luck finding any mortgage professionals in the equity release arena, prepared to offer their tuppence worth of wisdom and experience where you appear to have exhausted every conceivable avenue of redress.

In any event you should be aware MSE has specific rules about posters sharing sensitive legal documents by PM in the hope a professional or quasi professional will take their 'case'. Seems you are trying to adroitly skirt that restriction.

' Contempt of court

Please don’t post or exchange private messages about live court cases, as any discussions could influence proceedings and be classed as contempt of court, resulting in serious legal action against you. This includes the sharing of court and/or legal documents, either on the Forum or via private message.'

miltwin

Not been to Court so no live court case. No sensitive legal documents exist, just background Docs.

Am just trying to find a way through this…… and find avenues I might've missed. No harm in asking.

MWT

I can only comment from the perspective of someone who has a similar product with a similar reserve and has in the past drawn-down from that reserve.

There is no additional advice required at the point of drawing from a reserve established at the time the original product was taken, if they had requested a larger amount that the reserve would allow then there would have been a requirement for additional advice, but merely using what had already been agreed wouldn't have required any thought beyond applying the rules establish when the loan was first taken which would have included using the prevailing interest rate at the time of the draw-down, so there appears to be no flaw in the lender meeting your parents request for funds.

The advisor appears to have offered your parents a cheaper option, but that did not meet your parents requirement for no monthly payments, leaving the Lifetime Mortgage option which they took.

Nothing really leaps out as actionable, so not sure what you are hoping to achieve, but that is of course up to you.

miltwin

Thanks — that’s useful and probably the key difficulty with treating 2015 as a separate event. My concern is less that Aviva processed the drawdown incorrectly and more whether the original advice to establish such a reserve facility was suitable in the first place. I take your point that use of an already-agreed reserve may not amount to fresh advice or a new actionable decision.

MWT

To be honest, poor advise to your parents would have been to not establish a reserve as they did not have to pay anything extra for the facility and it allowed them to avoid paying interest on money that they did not need immediately..

You don't have to respond to this bit, but we do see a few people every year who arrive with the firm belief that their parents were mis-sold an equity release product when in practically every case the product was the only option that let them get access to capital with no monthly cost and no need to talk to their children.

The fact that they didn't talk about it at the time does not mean they did not understand what they were doing at that time.

I would always suggest that parents talk to their children when doing this so there is no misunderstanding about why they are doing it, especially as it is often to allow them to help those same children, or even if it is just so they have have a little more comfort or to bridge a gap into retirement.

There have been problems with some of the early products many years ago before proper regulation, but the odds of finding that on the highly regulated products from 2010 are very low indeed.

miltwin

I can see the logic of a reserve: if money wasn’t needed immediately, leaving it undrawn avoided interest accruing unnecessarily.

But then… £4,000 of the initial advance was borrowed at roughly 7% compound interest simply to sit in an instant-access savings account as an emergency fund, despite there already being an undrawn reserve facility.

And the adviser expressly identified a conventional interest-only mortgage as more cost-effective and said it appeared affordable, but still recommended the lifetime mortgage because my parents did not want monthly repayments.

The fact-find contains a formal “Attitude to Risk & Reward and Priority” section, but the questions, resulting profile and agreed joint risk profile are all recorded as “n/a”. There is a separate narrative equity-release risk section, so I’m not claiming risk was never discussed, but the formal assessment appears not to have been used. My mam & dad had no understanding of compound interest.

I’m really just trying to separate genuine concerns from hindsight. If the answer is ultimately “nothing actionable”, so be it. But those are the points I’m trying to get properly tested rather than simply arguing that equity release turned out expensive. But the economics of the loan are substantial.

And I'm repeating myself and going on a bit. Hell of a year. Apologies. I'll stop.

MWT

But then… £4,000 of the initial advance was borrowed at roughly 7% compound interest simply to sit in an instant-access savings account as an emergency fund, despite there already being an undrawn reserve facility.

It is not as irrational as it sounds, the reserve is not instant access, so keeping some money available without any waiting is still reasonable behaviour. Also it will have been earning some interest to offset part of that 7%.

And the adviser expressly identified a conventional interest-only mortgage as more cost-effective and said it appeared affordable, but still recommended the lifetime mortgage because my parents did not want monthly repayments.

A clearly stated desire for no monthly payments does rule out an interest-only mortgage so it wasn't really an option no matter how affordable it appeared.

The fact-find contains a formal “Attitude to Risk & Reward and Priority” section, but the questions, resulting profile and agreed joint risk profile are all recorded as “n/a”. There is a separate narrative equity-release risk section, so I’m not claiming risk was never discussed, but the formal assessment appears not to have been used. My mam & dad had no understanding of compound interest.

One of the brokers on here may be able to confirm, but I believe those sections mostly relate to determining the type of conventional mortgage that might be most suitable, so fixed vs variable rate, tracker options etc. also risk tolerance to interest rate changes through stress-testing. None of those are applicable to the type of mortgage that was being recommended as the interest rate is fixed for life, hence the 'N/A'.

Re your parents understanding of compound interest, I suspect you found in the paperwork a schedule showing how the loan would grow over time, the aim of that schedule and the way it would have been used in discussions is to clearly show the impact of the compounding, so even if they were not aware of it as a abstract concept, the effect would have been clearly shown to them.

Hopefully some of these comments may help to explain what must look like a highly questionable decision from this end of the time-line, but if you start from the position of a couple who decided they needed cash but did not want to have to make repayments then it all starts to become more logical.

Perhaps look at what they did with the money to get a better understanding of their motivations…?

kingstreet

Did your parents have capacity at the time and do you have access to the records of the solicitor who handled the transaction? I can't speak for 15 years ago but at this time everything presented by the advisor would be backed-up by a solicitor visit, often to the potential borrower's home.

miltwin

As far as I know, yes, they had capacity at the time. My mother having Parkinson’s did not in itself mean she lacked capacity.

There was a solicitor involved. I have the solicitor’s details and some of the conveyancing/release correspondence, but I don’t have the underlying attendance notes or file showing exactly what was discussed with my parents at the time.

I just wish they’d run it past me at the time, but ultimately it was their decision. I increasingly think it may simply have been a poor financial decision by people who were not especially financially adept, rather than something I’m ever going to be able to prove was mis-sold. A product like this punishes a weak decision very slowly and very heavily

MWT

https://forums.moneysavingexpert.com/discussion/comment/82154306#Comment_82154306

I just wish they’d run it past me at the time, but ultimately it was their decision. I increasingly think it may simply have been a poor financial decision by people who were not especially financially adept, rather than something I’m ever going to be able to prove was mis-sold. A product like this punishes a weak decision very slowly and very heavily

Focus on that thought, and consider what they did with the money.

Parents are always going to find it hard to admit to their child that they need money, irrespective of if their child could actually help.

Do you know what they did with the cash?

If, for example, it was to buy a new car then it was a very poor decision, but if it was to enable them to enjoy life and do things they wanted to do while they still could, then perhaps it was not a poor choice for them…