Life Loans are back

[RedOnion]

This is simply not true, in fact her eligibility should have improved

People get very confused, and mix things up.

You're absolutely correct re eligibility for the Fair Deal Scheme.
However, what people are no longer eligible for is the Nursing Home Loan Scheme (I can't remember if that's the correct name for it), which is secured against property.

There are 2 scenarios:
1. If they sell the house, there's no security. But now they should have the cash to pay their contribution.
2. If a life loan (or any mortgage) is secured against the property, you could be refused, as someone else has a first charge on the property.

 

[_OkGo_]

Yes that is a fair point and it was more than likely the Nursing home loan (as part of the FDS) that James mother was not eligible for. I still think his statement that selling the property made her ineligible is inaccurate. I think he was well intentioned and not trying to mislead but that his understanding was just incorrect. In your 2 scenarios, she would be ineligible for the nursing home loan either way but at least with cash after the sale, there is no longer a need for that loan

I can see how the life loan gets messy when it is a couple who are asset rich/cash poor and one spouse needs the FDS. The life loan prevents them from getting the nursing home loan so that puts severe pressure on their affordability of their assessed contribution. It would likely be higher than their joint income could cover. And because one spouse needs to remain living in the PPR, they will not be able to sell the PPR to fund their contribution to the scheme

 

[Odea]

When Duffy said to Brendan "Give over dis oul guff now" it really showed how professional a presenter Duffy is. I will make a complaint to RTE about the way Duffy treated Brendan. Wouldn't let him talk and went in to more ad breaks than he ever had on that segment of his show. Duffy just does not like being put in his place with actual facts.

Read back through these.

Your line is weak but your point is strong: Liveline from 10th January - Page 313 - boards.ie

 

[gianni]

When Duffy said to Brendan "Give over dis oul guff now" it really showed how professional a presenter Duffy is. I will make a complaint to RTE about the way Duffy treated Brendan. Wouldn't let him talk and went in to more ad breaks than he ever had on that segment of his show. Duffy just does not like being put in his place with actual facts.

Read back through these.

Your line is weak but your point is strong: Liveline from 10th January - Page 313 - boards.ie

The number of ad breaks, while deliberate, wasn't an effort to silence Brendan. I would imagine that they must take X number of ad breaks per show (Joe's salary ain't cheap).

It was just poor management of the running time of the show. I don't think that aspect of the show was unfair towards Brendan.

 

[Odea]

It was just poor management of the running time of the show. I don't think that aspect of the show was unfair towards Brendan.

He definitely had more ad breaks during the Brendan segment of his show than normal. He had a guy on the other day that he let ramble on and on for a long period with no ad breaks. He also dropped the "washer hands" bit that he has being doing for the past year because he was so rattled at someone not agreeing with his stance.

The people on the show were 3rd party people who now realise that their inheritance has gone on interest to the banks. Nothing else.

 

[Duke of Marmalade]

@_OkGo_ In a certain sense FDS is all about inheritance. In your example the position of the Estate is very marginally impacted by the alternatives. The difference between the two cashflows to the Estate are 7.5% of 150k for 3 years versus 7.5% of 350K after 3 years. Depending on life expectancy not much difference.

 

[gianni]

He definitely had more ad breaks during the Brendan segment of his show than normal. He had a guy on the other day that he let ramble on and on for a long period with no ad breaks. He also dropped the "washer hands" bit that he has being doing for the past year because he was so rattled at someone not agreeing with his stance.

The people on the show were 3rd party people who now realise that their inheritance has gone on interest to the banks. Nothing else.

Agreed, he had more breaks than usual in that segment. But I'd speculate that the overall number of breaks in the show was the same as normal.

 

[Brendan Burgess]

Agreed, he had more breaks than usual in that segment. But I'd speculate that the overall number of breaks in the show was the same as normal.

I don't think that there was any conspiracy. He has 1 hour and 15 minutes and x ad breaks. He probably didn't want to interrupt the flow at the start and missed a few. Anyone can listen back and count them.

Brendan

 

[RedDevil]

There is always a conspiracy you were interrupted constantly and there was a dissportionate number of ad breaks whilst you were on.

 

[Brendan Burgess]

Against that, he came back to me on quite a few occasions to get my response.

Brendan

 

[RedOnion]

Such loans were withdrawn in 2002 and launched again in 2020.

To clarify: These products were withdrawn in November 2010.

A point overlooked is that many were loss making. Across all providers. That's the main reason they were withdrawn.

Then, the CBI mortgage measures effectively made them impossible to issue as there was a lending cap based on income. These rules changed in 2019 removing that barrier.

I doubt we'll ever see a bank issue these products again.

 

[Allpartied]

I listened to yesterday's show on the radio player:- Liveline (rte.ie)

I should point out that on another thread on this forum I compared "Life Loans" to giving sweets to a child and for the record I am against such loans. The following is my opinion of what happened on the show:-



I have always said these so called Life Loans were bad products and I think I have average intelligence. But, the vulnerability, future health etc of applicants appears (to me) to be ignored for financial institution profit. Such loans were withdrawn in 2002 and launched again in 2020. That in itself tells a story. Bank of Ireland failed to supply a spokesperson which in itself suggests that "independents" should give such radio shows a wide berth. Why defend the Bank of Ireland when it won't defend itself?

I'll give you a simple example of how these loans, properly regulated and with education of borrowers, can be beneficial.

My mother lives in London, on a council estate, in quite a swanky part of the capital. She is a council tenant so can't avail of the scheme. She does benefit from the tenancy, in that any substantial maintenance is paid by the landlord ( the council). Her next door neighbour bought the house from the council in the 1980's and owns the property, mortgage free.

The neighbour is living on the basic state pension, about 180 pounds a week. She gets some help for winter fuel bills.
Other than that she has very little income. Her children are living in London, servicing huge mortgages, so they can't help her much. So she lives in relative penury, week to week. Unable to upgrade furniture, or household items. No holidays or meals out. Not much in the way of luxury.

However, her house is worth, approx 700k on the market. She's sitting on a gold mine.

In the UK there are dozens of products available to such pensioners. The one she took out, with the full knowledge of her children, is a Retirment Drawdown loan. This product gives her a lump sum, say 200k, which she can draw down at any time. She can draw down a small amount, or the whole lot, or take a regular chunk each month. She doesn't pay interest on anything she doesn't drawdown. The interest on anything she does drawdown can be paid off each year, or it can be left to rollover until she dies or vacates the property.

I don't know the interest rate, but the adverts in the UK , quote rates as low as 1.8%.

She is never going to qualify for any other kind of loan, because she doesn't have the income to service a loan.

I fail to see what is wrong with such products.

 

[Leper]

Nice post, Allpartied and I am delighted for your mother. I note she is paying interest @ 1.8%; the Irish equivalent Life Loan runs at just a little over 6% compound interest.

 

[Coldwarrior]

Nice post, Allpartied and I am delighted for your mother. I note she is paying interest @ 1.8%; the Irish equivalent Life Loan runs at just a little over 6% compound interest.

Because there's competition for these products in the UK and no competition here (only one company offering them). Part of the reason there's not more company's offering them here is there's a big reputational risk when the "hard done by" children of people who took out the loans go on national talk show radio and are allowed to sprout mistruths and FUD, largely unchallenged by the presenter.

 

[Allpartied]

Nice post, Allpartied and I am delighted for your mother. I note she is paying interest @ 1.8%; the Irish equivalent Life Loan runs at just a little over 6% compound interest.

So, how do you get more competition, more banks to get involved and a lower cost for such products.

One way would be to have a rational, factual discussion about these products and how they work.

Unfortunately, Joe Duffy torpedoed that with his show this week.

 

[Allpartied]

1. Joe Duffy didn't torpedo competition between financial institutions. Ridiculously high compound interest rates did.
2. BoI were invited onto Joe Duffy's radio show. They refused to attend or comment. Joe Duffy can only play what is in front of him so say something silly (or even sound silly) or fail to show up he'll be on that like a fly to flypaper.

My advice to anybody wishing for publicity:- Don't set yourself up as a stool pigeon if you don't want to be shot at.

But there isn't any competition at the moment. There is only one institution willing to provide these very useful products. Why is that?

The high interest that BofI were charging in 2005, wasn't actually very high at all.

Average variable rate mortgages were charging about 4.5 to 5% in 2003/4. So a 15 year fix rate at 6.9%, while expensive, was pretty reasonable.

Of course, if you don't pay a penny on your loan, for 15 years, it's gonna cost you a lot in interest, whatever interest rate your paying.

 

[Leper]

The title of this thread is:- Life Loans are Back.

Are they gone?

 

[NoRegretsCoyote]

Average variable rate mortgages were charging about 4.5 to 5% in 2003/4. So a 15 year fix rate at 6.9%, while expensive, was pretty reasonable.

The 2004 rate advertised was 6.25%. Irish government borrowed on average at 4.1% over ten years in 2004.

The life loan seems pretty reasonably priced given volumes weren't huge and it was an open-ended commitment by the bank.

A few 65-year-olds would have borrowed in say 2005 and will live until 100. Bank won't see its principal until 2040 - longer than most mortgage terms!

 

[odyssey06]

The title of this thread is:- Life Loans are Back.
Are they gone?

They seem to have disappeared from Irish market, no lenders were offering them.

Why Bank of Ireland does not do Life Loans anymore

People often ask why an older person can't borrow money on the strength of their mortgage-free home. I was in the Registrar's Court yesterday. Life loan of €360k given in Dec 2008 Interest rate: 6.9% Owner died 11/2013 Probate not granted until March 2016 May 2017 - Joint executor wrote...

www.askaboutmoney.com

A company is now dipping its toes into the water with an offering - see opening posts.

Cue Joe Duffy setting up a liveline programme to savage the concept with emotional calls from children whose parents blew their inheritance via a life loan for holidays, or in some cases the kids wedding!

Summary complete.

 

[Bronte]

1. Interest Rates – Bank of Ireland Life loans/Senior’s Money – Loans for people in older age needing to borrow money based on their only asset, their home, as they have no income to repay a normal loan. Also known as Equity Release

There were varying fixed interest rates available generally 6.7% to 6.9 %

15 years ago Home mortgage rates were around 5%. https://www.*****************.com/history-of-mortgage-rates-in-ireland.html

In no way can any poster or listener on Joe state that the interest rates were ‘high’. Not for the product they were. 6% to 7% would be seen as quite reasonable in such a context. You can’t today in 2021 with historically unbelievable low interest rates and negative interest on savings compare the rates now and then to say the rate is ‘high’.

Also if you compare the rates to current rates with Credit Unions what’s the big deal. I myself can remember rates hitting 13% and my first mortgage was 9% which I thought was a good deal ! Now I think I’ve literally money for nothing because it’s so cheap.

Nobody asked any of the listeners if they had overdrafts or credit card debts. What about those interest rates.

People in old age without the means have VERY good reasons for taking out such loans, home improvements, improving quality of life, converting homes for old age. And yes going on 50 cruise ships if THEY so wish. It's their home, their money. A fact hard to glean from the radio the last two days.

Products simply explained

Seniors Money reopens ‘reverse mortgage’ loans for over-60s

Lifetime loans available to older borrowers again at fixed rate of 5.5%

www.irishtimes.com