BoI jettisons its 'lifetime mortgages' as interest wanes
Published 18/01/2011 | 05:00
BANK of Ireland has pulled out of a niche mortgage market that allowed elderly people to release equity in their homes and repay the debt from their estates.
The news, which comes more than 10 years after BoI launched so-called 'lifetime mortgages', was confirmed by a bank spokeswoman last night.
BoI was the only mainstream bank to provide lifetime mortgages that were widely used to allow 'empty-nesters' cash in on rising house prices during the boom years.
The bank was one of the three biggest players in the market, along with specialist providers Seniors Money and SHIP.
SHIP, which was founded by former Irish Life & Permanent boss Billy Kane back in 2003, stopped offering new products in 2009.
BoI has been asked to draw up a wide-ranging restructuring plan for the Central Bank, but a spokeswoman last night insisted its decision to exit the lifetime loan market was "purely based on low demand versus the cost of providing [the service]".
The bank experienced "substantially reduced interest for the product" in recent times and had seen "zero adverse customer reaction" to its November withdrawal from the market, she added.
BoI's experience is in direct contrast with Seniors Money Ireland, which says it enjoyed a strong 2010 and fielded as many calls in the first week in January as in the whole of December.
"We now have a set of economic circumstances which is causing a lot of Irish people in their 60s and 70s to reassess their financial situation and consider new alternatives," said company boss Derek Handley.
"Pensions and nest eggs have been decimated by collapses in share prices, especially bank shares which many had hoped to rely on in their retirement years."
Seniors Money believes the latest hike in health insurance premium may trigger more applications, as retirees on fixed incomes struggle to cope with rising bills.
Lifetime mortgages are typically viewed as safer than regular mortgages since the loan makes up a far smaller percentage of the value of the house.
BoI said loan to value of their lifetime portfolio was "commercially sensitive", as was data on losses on lifetime loans.