In this month’s issue, we discuss Lifetime Loans with Aidan Horgan from Spry Finance.
Interview with Aidan Horgan , Spry Finance
Welcome Aidan, Seniors Money Mortgages (Ireland) DAC is the only provider of lifetime loans in Ireland. Can you remind people what a Lifetime Loan is?
A Lifetime Loan is a loan specifically for persons aged 60 or over where they can release some of the value they have in their homes. A Lifetime Loan is a mortgage secured against their principal private residence in Ireland but crucially there are no monthly repayments to be made so the total loan will increase in value over time. However, clients can choose if they wish to service the loan quarterly so that the loan doesn’t increase over time. Persons aged 60 can borrow a maximum of 15% of the value of their home. Persons aged 70 can borrow a maximum of 25% so the % depends on your age at the outset. The overall maximum that can be raised is 40%. The rate is fixed for life at 4.95% so the loan will double every 14 years or thereabouts. The loan is repayable if the borrowers cease to reside in the property which is usually on a death or permanent move to care.
When Seniors Money Mortgages (Ireland) DAC – which is the only provider of lifetime loans in Ireland – re-opened to new applicants in January 2021 you also introduced a new retail brand, Spry Finance. What was the thinking behind this?
Both Spry Finance and Seniors Money are divisions of Seniors Money Mortgages (Ireland) DAC. Which is the Irish operation of the Seniors Money International group (SMI). Spry Finance is the new retail division. Its role is to promote the product and then guide people through understanding and applying for a Lifetime Loan. The loan itself is still provided and serviced by Seniors Money, the lending division, which has been the leading lifetime loan lender in Ireland for over 15 years.
Spry Finance was established to create a clear distinction between the loan origination role (generating leads and then providing information, support and guidance to those who are making the decision about applying for a Lifetime Loan) and the role of being the lender and servicer of the lifetime loans thereafter. Until now both roles have been carried out under the Seniors Money name (so Spry inherits, all that experience). With the welcome and ever-increasing focus on consumer protections in relation to financial services, we believe that having a separate division with a specific focus on the sales and arranging phase will help the group maintain its position as the market-leader in the lifetime loans space in Ireland, both as an originator and as a lender.
How does the sales process work?
Spry Finance continues to follow our tried and trusted model whereby 100% of potential applicants, irrespective of whether we generated the lead ourselves or it was referred to us by a broker, are required to undergo a consultation process with one of our Spry Client Consultants. In addition to comprehensive information being provided to the client, the process focuses on what the client’s personal and financial circumstances are and whether or not a lifetime loan is a suitable solution for them.
It is not in our interest to lend to people who do not fully understand how a lifetime loan works or for whom a lifetime loan is just not suitable. Spry will routinely advise clients that a lifetime loan is not suitable for them, if that is the case. Where it is established that the loan is suitable, Spry will assist the client in preparing their application and submitting it to Seniors Money. Seniors Money then takes care of processing the application, making a credit decision and creating the new loan.
Has the COVID-19 pandemic impacted upon the company’s ability to reach new customers and, if so, how is the business adapting to new ways of working?
The Spry consultation process ordinarily includes a number of face-to-face meetings with clients. In Ireland these meetings customarily take place in the client’s own home. Clearly our ability to conduct such consultations is impacted by COVID-19 lockdown restrictions.
Like many other businesses we have developed new ways to do business. A lot of the preliminary interaction with clients is now done over the phone and via email. Where face to face meetings are permissible they are conducted under social distancing rules, including the use of face masks and table-top acrylic screens. We’ve also equipped the Consultants with external screens for their laptops which can be turned to face the clients from a distance, and documents are provided and signed electronically, further reducing or eliminating physical paperwork. Where physical meetings are not allowed or feasible, we can conduct much of the consultation via video conference, although we still insist on at least one substantive face to face meeting before an application can be accepted and this has necessarily slowed down the progress of some cases through the pipeline as we await a re-opening of lockdown restrictions. We don’t think it is something that can be compromised on though, to ensure that we have the best possible understanding of each end every client.
What did clients use Lifetime Loans for?
Overall, 26% of the funds drawn down have been used to enhance peoples’ lives including establishing a cash fund for emergencies where none previously existed. A similar proportion of the funds, 23%, was used for home improvements or purchases for the home indicating that this is a highly important objective. Borrowers typically want to make their home more comfortable and energy efficient. Clients also used 21% of the funds drawn to eliminate ongoing repayment burdens by using the Lifetime Loan to pay off outstanding mortgages and other loans. We have seen many instances whereby clients repaid problem mortgages which were in serious arrears.
Most loans are used for more than one purpose, with most borrowers focused on life improvement. These are generally once-off expenses that may be a challenge to fund solely from a retirees’ existing pension income.
How do you assess prospects for growth in the equity release market for seniors in Ireland for the year to come?
We are very positive on the prospects for growth in Irish equity release market in the medium term.
The number of Irish people aged 60 or older has increased by over 50% since Seniors Money first entered the market back in 2006, and these people are more active and feeling younger at heart than ever before – arguably therefore having an even greater desire than their predecessors to maintain a certain level of lifestyle in retirement. Unfortunately, adequate pension planning and provision has not improved much in that period for many of this new and growing cohort of over 60s who now face the same classic issue of being asset rich but cash poor.
We see equity release as an increasing element of retirement planning going forward. Looking forward to 2022, we see further growth in demand for equity release as the Irish economy fully reopens following Covid-19. We expect to see increasing numbers of our client base exploring the equity release product to see what opportunities the product can offer them.
To find out more about lifetime loans please do not hesitate to contact a member of our advisory team at Jim@hegarty.ie, Niamh@hegarty.ie, Frank@hegarty.ie & Ross@hegarty.ie or alternatively you can call the office directly on 01 4972544.
Book Launch – Hegarty of the Laurels
The Hegartys of the Laurel’s book launch went ahead as a great success on the 7th of April 2022 at Cork City Library as part of the City life long learning festival. The library also held an exhibition of the Hegarty family artifacts of the period.
The Hegartys of the Laurels tells the story of how a family home played a crucial role in Ireland’s independence struggle in Cork. The Laurels was a tranquil homestead and the centre of a thriving market gardening business. With the outbreak of the War of Independence however, the Hegarty homestead was transformed into a nucleus of subversive activity, a safe house, landmine factory, arms and ammunition dump, the No 1 Brigade’s base, and a base for Cumann na MBan’s intelligence gathering. Pictured above from left to right is Jim Hegarty Author alongside the Lord Mayor of Cork Colm Kelleher and Bishop Emeritus of Cork & Ross John Buckley.