Lifetime loan provider Spry Finance plans to more than double its lending over the next three years.
The group, which specialises in lending to people over the age of 60, says it expects to be writing €150 million a year by 2025. It is currently the only lender in that sector of the market.
The company has lent about €60 million to about 750 people since returning to the Irish market at the start of last year and says it currently has 3,000 customers in total on its books.
Spry recently agreed a long-term funding arrangement with Canada Life Reinsurance which will refinance its existing loan book and provide funding for future lending, allowing it to meet what it says is growing demand for its product. The company is also looking at a range of new products that it could launch in the Irish seniors lending market.
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“We know that there’s demand for our product, not only because of the growth that we’re seeing, but ... also from the fact that the over-60s are incredibly poorly served by the traditional banking sector,” said chief executive John Moriarty. “When the banks won’t lend, the alternatives — downsizing, or renting rooms in your home — don’t appeal to many.
“Ireland has a cohort of older people who are asset-rich, but cash-poor. A lifetime loan allows them to realise some of the value of their home, while continuing to own it and to live in it.”
Lifetime loans operate by lending a person or couple a proportion of the value of their home. Interest on the loan can be consolidated with the original borrowings with the full amount paid off when a person dies or the property is sold. Spry’s contract stipulates that the money owed will never exceed the eventual value of the property at the time the loan falls due.
People can borrow from 15 per cent of the value of the home at the age of 60 up to 40 per cent of the property’s worth at the age of 85 or older. The minimum amount they can borrow is €20,000 and the minimum value of properties that will be considered by the company is €250,000 in Dublin and €175,000 elsewhere.
The loan application process carries a flat cost of €1,500, including a property valuation. But that figure does not include the cost of legal advice secured by the applicant.
The loan is structured as a lifetime mortgage and a first charge against the home. Interest is fixed at the time the loan is taken down. Currently that figure is 6.45 per cent, though it is likely to rise in the wake of European Central Bank rate increases.
People who choose to do so and have the financial resources can repay up to 10 per cent of the loan in any year spread over up to four annual payments if they choose.
Spry says that about a quarter of its customers borrow for home improvements or adaptation, with another quarter using the money to pay off outstanding mortgage or credit card debt. A further 25 per cent use it for “lifestyle enhancement”, such as providing extra monthly income or a financial fund for emergencies.
About one in 10 uses the borrowings to fund financial gifts for family rather than waiting until they die for the home to become available as inheritance.
They differ from residential reversion — an equity-release product also targeted at old borrowers — in that it does not take ownership of a portion of the family home at the time of borrowing.
