Calculating your Variable Repayment Charge ("VRC")
The VRC is an early repayment charge that applies to our lump sum lifetime mortgage and flexible lifetime mortgage. We put in place fixed rate funding to match the expected duration of each fixed rate loan and the VRC is calculated to reflect the cost of the mis-match that arises if a loan is repaid earlier than we expected.
More information about the VRC, and the formula we use to calculate it, can be found in our Product Summary and our Early Repayment Charges factsheet. Speak to you Financial Adviser if you require a detailed explanation or if you have any questions.
What is a 25 year swap rate?
The 25 year swap rate is the rate quoted in the money markets for borrowing funds at a fixed rate of interest over 25 years. Hodge Lifetime's funding costs are therefore determined by this rate, as the expected duration of lifetime mortgages is around 25 years on average.
Where does swap rate data come from?
We aim to make the VRC calculation as transparent as possible. Swap rates are set daily based on traded prices in the financial markets. Whilst this data is not publically available, we will publish the relevant data at the start of each month on our website (see below).
How do we use the 25 year swap rate?
We set the 25 year swap rate on the first working day of each month (to reflect the swap rate published on the previous working day). When a loan is redeemed early, we will look at the swap rate that applied in:
- The month you took out the loan;
- The month you repay the loan.
If the rate has fallen between these dates, this fall will be used in the VRC formula. We will guarantee each VRC calculation for two weeks from the date it is prepared.
25 year swap data
The table below shows the 25 year swap rate we set on the first working day of each month (being the rate as at close of business on the previous working day):
The graph below shows the trend in the 25 year swap rate since 2000.
This is a lifetime mortgage. To understand its features and risks, ask your Financial Adviser for a personalised illustration.