Two major equity release lenders have begun tailoring their rates to individual borrowers and their properties in a move that is expected to spark a trend within the sector.

Earlier this year, Pure Retirement revealed it would be introducing personalised interest rates based on each borrower’s postcode, property type, age and loan amount.

The lender continues to offer rates in its Heritage and Sovereign ranges that are based on age and loan-to-value alone.

This helps advisers who want to tailor their service and really dissect the options, rather than get business through as quickly as possible

More recently, Just announced it would be offering medical underwriting on its Just For You range in a bid to provide enhanced rates and LTVs to borrowers with health conditions or lifestyle factors that might limit their life expectancy.

The company has long offered medical underwriting on its annuities and has previously done so on its lifetime mortgages, but the new dedicated products and set of around 20 health-related questions have streamlined the process and made this option far more visible and accessible to advisers.

Knight Frank later-life finance associate David Forsdyke says other lenders also take health conditions into account, but he has not always found this beneficial for the types of client he deals with.

Forsdyke says: “Aviva has also had medical underwriting in its  product make-up for a long time, but has not really made a lot of noise about it.

They can capture data very quickly and easily, which helps with lending decisions

“It will try to enhance its lifetime mortgages in the same way — by improving either the rate or the LTV — if it feels it is appropriate.

“However, what we have found is that, because the majority of our clients are in the high-net-worth market, they are typically borrowing at reasonably low LTVs and so they are already getting very keen interest rates.

“We do not typically find that the rates on the enhanced products are any better than those that we would be able to secure for those clients without medical underwriting.

“I think these deals are more geared towards clients who need to borrow higher amounts at maximum LTVs, which is more often the case in the mainstream market.”

Yet Forsdyke finds some lenders that do not particularly advertise medical or postcode underwriting are willing to look at this on a case-by-case basis for Knight Frank’s high-value clients.

He says: “Where the borrowing is above a million, there is a growing appetite among lenders to try and do something for those borrowers, so they might try to tailor the product or offer some bespoke pricing once they have underwritten the client and the property.

“They may come back with a proposal that is not necessarily part of their mainstream product range.”

There is so much data available that lenders can tell a lot from very quickly, just off the back of the postcode

The Later Life Lending Network equity release manager Victoria Wilson believes the move towards personalised pricing is a welcome development for customers and brokers alike.

Wilson says: “It helps those advisers who want to tailor their service and really dissect the options, rather than just get the business through as quickly as possible by choosing the top option on the sourcing system.

“The more personal the better, especially with everything the Financial Conduct Authority has been talking about recently.

“I think it is a positive for the sector,” adds Wilson.

Postcode pricing, meanwhile, has benefits for lenders in allowing them to carefully manage the risk across their portfolio.

The idea of standard pricing won’t exist any longer. This will be an evolution, as we saw in the annuity market

Forsdyke explains: “There is so much data available that lenders can tell a lot from very quickly, just off the back of the postcode.

“They can look at crime rates, they can look at property values and how these have tracked historically, as well as transaction levels.

“They can capture that data very quickly and easily, which helps with lending decisions. That is where I believe Pure is trying to be more dynamic.”

Pure Retirement head of products Brendan Gilligan says another advantage for borrowers is that pricing is much more granular, rather than rates being grouped into LTV tiers where there might be a substantial jump in costs for a borrower who falls just outside one LTV band.

He adds: “It encourages responsible borrowing, because customers are quoted a rate for the sum they want to borrow, which means that hopefully they will take out only as much as they need.”

The more personal the better, especially with everything the FCA has been talking about recently

Just director of propositions Sarah Morris-Simpson envisages personalised pricing becoming the norm for the equity release sector.

She says: “I think where we will end up is that the idea of standard pricing won’t exist any longer. This will be an evolution, as we saw in the annuity market.”

Morris-Simpson continues: “In our view, whenever you are putting in place something that is there to last a lifetime for the client, it should reflect the client’s life expectancy.

“That is really where we are trying to move the market — to ensure that this is considered whenever a mortgage is taken out.”