Exclusive: Pritchard ready to launch equity release provider

Pritchard’s provider, which will be under the Charterhouse Retirement Solutions brand, is a joint venture between CRS and an originator with existing operations in the market and backed by venture capitalist funding. Pritchard refused to identify the originator or the VC at this time as the deal is in its final stages but plans to launch next month.

The tie-up means that Charterhouse Retirement Solutions (not to be confused with its parent company, Charterhouse IFA) will provide funding and use the existing originator’s FSA permissions to facilitate lending. The third party originator will also provide servicing and administration, white labelling for CRS in the short term, Pritchard said.

The product, called the Home for Life plan, will be available via a limited distribution to networks and packagers from mid June. Pritchard said he did not plan to distribute via Key Retirement Solutions, the equity release advisers for which he worked in 2008/9.

He said: “KRS has its own selected panel of favoured lenders and given my personal relationship with many brokers, I want to make sure the intermediaries who have stuck by us get a first look at the products. If they fail to produce the required amounts, we will widen the channels.”

Dean Mirfin, KRS group director, said: “KRS doesn’t have a panel of lenders – we are whole of market.

“What I would say is that it will be important for CRS to have SHIP membership if they’re offering equity release.

“Providers which have opted to stay out of SHIP have found it hard to operate in the market. KRS does not do business with any provider that doesn’t adhere to SHIP standards.”

Nigel Hare-Scott, managing director of Home & Capital Advisers, welcomed the announcement.

He said: “Any new entrant into this market is great news, particularly after the well-publicised withdrawal of so many providers.

“Demand for equity release is projected to increase enormously in the future.

“It is vital though that CRS provides the same security of tenure safeguards offered by SHIP members, including, most importantly, the right to move.”

Trade body SHIP, which aggregates its members’ data, said the value of equity release advances fell 8% from £231.7m in the fourth quarter of 2009 to £213.4m in the first quarter of 2010.

While SHIP said “the market is suffering some effects from the loss of providers,” it maintains that demand for equity release products remains.

In the last nine months Prudential, Stonehaven, Saffron Building Society, Northern Rock and Retirement Plus have all withdrawn from the market.

Andrea Rozario, director general of SHIP, said that Pritchard’s move into the funding market “shows there is certainly an increased interest which we believe will grow as the drivers for equity release continue to increase as our society ages”.

And she added: “Product innovation and flexibility are key to this sector.”

Pritchard’s provider will operate on a UK wide basis and will include Northern Ireland in the third quarter of this year.

There will be regionalised restrictions on some of the release levels to reflect property market conditions across the country.

The plan will have a rental element of between 1% and 3% which Pritchard says will mean the provider incorporates a robust underwriting process looking at affordability. He says the inclusion of this element allows investors to offset their funding costs because they receive a small income through the lifetime of the product.

He said: “Effectively that means we can lend larger sums to the customer, because the cost to fund is lower.” But he was unable to confirm specific product pricing details as the product is still being finalised.

Providers Bridgewater and Hodge offer comparable reversion products, but Pritchard says his product is suitable for customers with a lot of outstanding debt because CRS will look at the position carefully.

“Release values will be significantly higher than anyone else,” Pritchard went on to say, adding that “take away much higher mortgage payments against the new rent”.

There is no maximum age for borrowers applying for the loan if they fit criteria. The first borrower’s minimum age will be 50, with a second borrower at 45. Brokers will receive a commission rate of 2% of the release value.

Pritchard said: “The timing is bang on for a launch into the equity release market – there’s not enough funding out there, and it’s often not attractively priced.

“We’ve listened to the market and that’s why we’re adding the rental element. It’s giving customers the amount of equity they want and need at rates they can afford.”

The rental element will be protected by a single premium insurance package, provided by Rentguard Insurance, which can be proportionally refunded to the customer if the principal is repaid before the term of insurance is up. And Pritchard says, “single premium protection has a place for some borrowers.”

In February Jon Pain, the FSA’s managing director of retail markets, sent letters to all firms selling payment protection insurance products on unsecured personal loans requesting that they stop, “selling single premium PPI with unsecured personal loans as soon as possible and in any event by 29 May 2009.” The FSA also said it intends, “to bring an orderly withdrawal of single premium PPI from the market.”

But Pritchard defends the use of the Rentguard product, saying: “The problem is the level of much higher commission paid to the adviser immediately. But this product pays 10% to cover admin and set up costs which will make nobody rich.

“For paying a single annual premium, customers do not get the normal RPI increases in charges and actually get a small discount.”

He added: “Rentguard is a necessity for the elderly and is completely different from PPI. It stops anyone from being evicted which is why I insist it is used.”

New Team

CRS has appointed a new management team to head up the lender.

Steve Swyny will be sales manager of the mortgage division. He joins from former network Mortgage Times, and previously worked with Pritchard at packager Chase UK until 2006 when both men left the company, which was majority owned by Pritchard.

Other appointments to the management team at Charterhouse Retirement Solutions include Martin Kemp, who joins as director of commercial from Hamptons and John Cooper, formerly head of partnerships at Lehman Brothers, who joins as operations director.

Pritchard added: “I’m delighted to have such a good team on board. We have high hopes for the Home for Life plan, and if all goes according to expectation, we’ll release further funding to meet demand.”

Charterhouse Retirement Solutions is a mortgage club and network specialising in equity release and was set up in May 2009 as a joint venture between Terry Pritchard and Michael Holt, director of Charterhouse IFA.

Clayton Euro Risk European sales director Michael Bolton, who worked with Pritchard at specialist lender edeus, has a 15% shareholding in Charterhouse RS. He was unavailable to comment.