Home Equity Release Loans Total $20 Million Plus

11 November 2004

Home Equity Release Loans Total $20 Million Plus

In its first nine months of operation, home equity release company, Sentinel, has received more than 5000 direct enquiries( with many more received by advisers), and received applications for more than 500 loans totalling over $20 million, of which $17m have been settled so far.

Managing Director Richard Coon told guests at a function in Auckland this evening (November 11) to celebrate the milestone that the company’s results far exceeded expectations and the company had now doubled its original first year plan.

“We believe we can confidently claim the market leader mantle,” Mr Coon said. “While that presents us with opportunities, we also have responsibilities in relation to the way in which this market develops.”

“There should be full disclosure about the product and sound, thorough independent advice given as to the impact on the estate, the benefits and the risks. Conditions such as guaranteed occupancy for life and loan repayment guarantees are critical,” Mr Coon said.

For the growing number of New Zealanders over the age of 60, life is full of uncertainties.

“They don’t know how long they will live, what their health will be, what will happen to property values etc. Despite the fact they have worked hard all their lives, many of them have not been able to have put enough money away to live comfortably in retirement. Home equity release is a solution to this and certainly will be able to help when life throws up the unexpected.”

Reasons given for taking out a Lifetime Loan include home improvement, replacing the car, helping the family, travel, medical expenses, repaying debt( including high cost credit cards) or just making day to day living easier and more enjoyable.

An analysis of people taking up the Sentinel offer shows 58 percent are married couples, 28 percent single women and 14 percent single men. The average age is 73 years and the average loan, within a range of $20,000 and $500,000, is $43,000. On average people have borrowed sixty-five percent of the maximum they are able to which Mr Coon says means they have the security of knowing they can go back for more if they need to.

Sentinel has also proved popular with the financial community – more than 500 financial advisors have signed up to sell Sentinel products. Even for those with reasonable retirement funds many financial planners now see the Lifetime Loan as a key element in any financial plan as they can manage more effectively the decumulation of the portfolio to a certain age at which point the Lifetime Loan would be available to cover the balance of one’s life.

Worldwide home equity release products are becoming increasingly popular (a recent UK survey by ERIC, the Equity Release Information Centre showed 98 percent of people were satisfied with their loan and 91 percent would recommend this to others). Sentinel has just sent out a survey to their customers and responses so far indicate similarly high levels of satisfaction.

“We will be working with Government, looking at issues such as funding of its declared “age in place” strategy( where older people are encouraged to stay in their own homes) and taxation considerations particularly in respect of annuities. We are also looking at a Code of Practice.”

Mr Coon, with his brother Chris Coon, who founded the successful insurance company Sovereign, say they enjoy being “pioneers”.

“What is even more exciting is that we are starting with such a young market where there is such a huge appreciation of the changes we bring. I predict that over the next 50 years there will be an enormous developments in terms of intergenerational wealth transfer, decumulation and management of uncertainty in retirement.

“The stories we have heard from the people whose lives Sentinel has been able to change completely, leave us in no doubt that our solution, home equity release through a Lifetime Loan, is not just a commercial success. It’s a societal benefit.”

ENDS

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